The Insolvency Service seem keen on setting precedents recently. Early last month the NTI newsroom brought you the story of the first director facing a compensation order following abuse of the Bounce Back Loan (“BBL”) scheme. Well barely a month later and the sequel is here.
Mr Valchev was a director of London-based gift company Healthy & Tasty Limited selling fruit baskets, chocolates, hampers and flowers. One presumes the products were either healthy or tasty, not both. Valchev has received an order to repay £43,570 after abusing the BBL scheme. In addition to the compensation order, the judge also disqualified him as a director for nine years.
The company went into liquidation in July 2021 and the filed statement of affairs shows assets totalling the grand total of 96pence. The creditors on the other hand were £50,000 owed under the BBL and one further creditor owed just over £100,000.
As we know, BBLs were a government scheme to help businesses to stay afloat during the Covid pandemic and companies could apply for a loan of between £2,000 and £50,000, up to a maximum of 25% of their turnover.
Last month, District Judge Geddes imposed the order and disqualified Valchev, after hearing that the director had given false information to claim the maximum Bounce Back Loan amount of £50,000 in May 2020. The company’s actual turnover on which the loan should have been based was around £35,400, which meant Healthy & Tasty Ltd had been entitled to less than £9,000 and had ultimately received more than five times that amount.
Valchev argued in court that he was unable to repay the money, but the Judge rejected this, and ordered him to repay £43,570, which included the excess amount that he had falsely claimed, plus interest. Not healthy but tasty.
Rob Clarke, Chief Investigator of Insolvent Investigations North at the Insolvency Service, said: “Valchev abused taxpayers’ money to give his company an unfair advantage over other businesses impacted by Covid-19”. He continued, “ This is the first Compensation Order handed out to a director who challenged our case in court. It is a significant result for the Insolvency Service and shows that abuse of the public purse will not be tolerated”.
Another director sitting on the disqualification naughty step, is Mr Connor, who was the sole director of Regal Coinage Ltd, a dealer of collectible coins based in London, until it went into liquidation in February 2022. The statement of affairs declared no company assets but over £200,000 owed to consumers and over £300,000 owed in total. The company claimed to sell rare and investable coins to customers, and to act as a brokerage, selling coins on their behalf.
Bank statements examined in the investigations revealed over a period of several months, one customer in particular made payments totalling £162,000 to both the company and directly to Mr Connor, including at least £83,250 for coins that were to be held by the company for resale on the customer’s behalf. In addition, it was discovered that (surprise surprise) these coins were not in Regal Coinage Ltd’s possession when the business went into liquidation. The company had failed to supply the customer with coins that they had bought, or pass on any funds from coins sold on their behalf, meaning the customer was left out of pocket by at least £155,499.
Martin Gitner, Deputy Head of Insolvent Investigations at the Insolvency Service, said: “Mr Connor took a substantial amount of money from a member of the public who believed they were dealing with a trustworthy coin expert. His lengthy ban should be a warning to others that we will take action to remove rogue directors from the business arena.”
He was banned as a director for 11 years. A factor in the disqualification length was surely that Mr Connor, who was listed on the company’s records as a professional numismatist (someone who studies and collects coins), had previously been director of two similar coin businesses, Hallmark Coins and Sourcing Coins. He had earlier been employed by another company, Regency Coins, whose directors were disqualified for similar practices.
As these two cases highlight, The Insolvency Service have their powers and seem to have discovered that if used they can get results. The NTI newsroom will be here to bring you the latest in this movie franchise.