The continuing rise of claims against fraudulent directors and convictions of criminal activity is a reminder that especially in desperate times, schemes designed to benefit the economy can be taken advantage of.
Given the likelihood that funds obtained by companies abusing these schemes fraudulently are quickly dissipated with no significant assets to show for it, this crackdown will lead to further contentious insolvencies with the appointed liquidators using the powers granted to them under the Insolvency Act 1986, such as transactions at undervalue, preferences and transactions defrauding creditors.
Whilst the aim is to ensure that fraudsters who have benefitted from these schemes are brought to justice, there is still an overarching objective to recover funds for the creditors as a whole.
Creditors should be mindful of companies receiving these schemes and entering voluntary liquidation shortly thereafter. Whilst not always the case of a fraudulent director, the creditors should raise their suspicions with the appointed liquidator to ensure a full and frank investigation into the use of these schemes, which may or may not be legitimate. The liquidator can then consider action under the relevant powers.
The number of company directors convicted of criminal activity during the pandemic has risen 205 per cent to 122 in the year to 30 September, up from just 40 for the same period to 30 September of last year. This trend is set to continue as the Insolvency Service takes an increasingly tough stance on fraud during the pandemic.