The Government has denied reports that it has written off £4.3bn of fraudulently claimed pandemic support loans, advanced under the coronavirus business interruption (CBILS), bounce back (BBLS) and recovery loan schemes (RLS). On Monday, Treasury minister Lord Agnew resigned over government inaction, accusing the Treasury of having "little interest in the consequences of fraud to our society" and of making "schoolboy errors" over the awarding of loans. 

The BBLS was particularly vulnerable to fraud due to the limited underwriting checks carried out at the point of lending. Altogether around £46.5bn was lent under the BBLS, to over 1.5 million businesses.  

As we have previously reported, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill has recently been passed to address the risk of directors fraudulently claiming these pandemic support loans and then simply dissolving their companies to avoid any further scrutiny. Under the new legislation, the Secretary of State will be able to pursue disqualification proceedings against directors of dissolved companies and seek an order that the director must financially compensate creditors, where their actions caused identifiable losses. However, this will depend upon the Secretary of State pursuing the case, which is likely to rely upon a complaint being made to the Insolvency Service, or through a connection with an existing live or insolvent company investigation, and of course is always limited by government funding. 

Given the Secretary of State's limited resources, and the lack of insolvency officeholder to undertake such investigations in the case of dissolved companies, the question remains how effective these new measures will be. Even if disqualification proceedings are successfully brought and compensation orders awarded, there is no guarantee that any defrauded sums will be available for recovery in favour of HM Treasury.