Bounce Back Loans Under Fire: Are Directors Now Personally at Risk?
The UK’s Bounce Back Loan Scheme (BBLS) was introduced in 2020 to help small businesses survive the Covid-19 crisis. Lenders could provide loans from £2,000 up to 25% of a company’s 2019 turnover (maximum £50,000).1 The application process was deliberately streamlined, enabling companies to access funds quickly at a time of acute financial pressure.
Several years on, the position has shifted.
Bounce Back Loans are now a significant area of regulatory focus. The Insolvency Service has been actively investigating the circumstances in which loans were obtained and how those funds were subsequently used.
The scale of enforcement is notable. In 2024–25 alone, more than 1,000 directors were disqualified, with approximately 71% of those cases linked to COVID-related financial support.2 Disqualification periods of up to 15 years have been imposed, alongside compensation orders requiring repayment of the loan, frequently with interest. Courts have shown little hesitation in treating inaccurate applications or misuse of funds as falling below the standards expected of company directors, even where the original intention was not dishonest.
In a recent decision made in February 2026,3 the High Court imposed an 11-year director disqualification and a compensation order the sole director and shareholder of 7Speed Ltd, for serious misuse of the Covid-era Bounce Back Loan (BBL) Scheme.
Background
7Speed Ltd, incorporated in 2018, purported to trade in used cars and motor parts. In May 2020, Ms Pal applied for a £50,000 BBL through Santander, declaring a 2019 turnover of £220,000, despite the company’s accounts and bank records showing the company was effectively dormant with no meaningful turnover.
The loan was paid out on 12 May 2020. Within five weeks, £49,997.50 had been withdrawn, roughly half transferred directly to Ms Pal and the remainder to unrelated individuals and entities. None of the funds were shown to have been used for legitimate business purposes. No repayments were made, and the company was dissolved in July 2021. Santander reclaimed the loan under the government guarantee and referred the matter to the Insolvency Service.
Decision
The court found that the turnover declared in the BBL application was knowingly false or at least reckless, the funds were almost entirely misapplied and not used to benefit the company, and the absence of any supporting documentation was a “conspicuous” indicator of misconduct. The court therefore disqualified her for 11 years under s.6 CDDA 1986 and ordered her to pay £50,000 plus interest to Santander under s.15A CDDA.
To read the full judgment, click here.
https://www.bailii.org/ew/cases/EWHC/Ch/2026/262.html
https://www.bailii.org/ew/cases/EWHC/Ch/2025/98.html
Footnotes
[1] Lenders could provide loans from £2,000 up to 25% of a company’s 2019 turnover (maximum £50,000). 1. Bounce Back Loan Scheme (BBLS) | British Business Bank <https://www.british-business-bank.co.uk/finance-options/legacy-programmes/bounce-back-loan-scheme-bbls>.
[2] with approximately 71% of those cases linked to COVID-related financial support. 2. Press release, Insolvency Service disqualified more than 1,000 directors in 2024-25 <https://www.gov.uk/government/news/insolvency-service-disqualified-more-than-1000-directors-in-2024-25>.
[3] In a recent decision made in February 2026. The Secretary of State for Business and Trade v Pal [2026] EWHC 262 (Ch).
[4] In another recent case. The Secretary of State for Business and Trade v Ahmedivand [2025] EWHC 98 (Ch).
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FAQ
Some questions we get, which may help you in this moment
When you receive a Letter of Claim or a formal Claim Form, you are at a critical crossroads in a legal dispute. While they may look similar, they represent two different stages of litigation, and mishandling either can lead to unfavourable financial and legal consequences.
A Letter of Claim, also known as a Letter Before Action, is a formal warning that someone intends to start court proceedings against you. Under the Civil Procedure Rules, parties are expected to exchange enough information to understand each other’s positions and attempt to settle without involving the court.
Ignoring this letter is a high-risk strategy. Even if you believe the claim is meritless, the court can penalise you later by ordering you to pay the other side’s legal costs, because you failed to follow the required Pre-Action Protocols. This stage is actually a vital window of opportunity. It allows for strategic negotiations or Alternative Dispute Resolution (ADR), which can resolve the matter privately and more cost-effectively than litigation.
If you receive a Claim Form, on the other hand, the matter has officially entered the court system. This is more urgent than a preliminary letter. From the moment you are served (which is deemed to occur 2 business days after the documents were posted to your last known address) the countdown begins.
If you do not engage with a claim, the other side can request a default judgment 15 days after you are deemed to have received the Claim Form. Once this judgment is entered, it is a matter of public record that can significantly damage your credit rating for 6 years and allows the other side to take enforcement measures.
There are procedural steps available to protect you in such situations. For instance, filing an acknowledgement of service is a vital holding position and allows you more time to prepare a proper defence. Engaging with a solicitor at this moment is essential to identify potential flaws in the claim that can allow you to have the claim stopped or struck out.
A court judgment (often called a CCJ) is a serious matter that allows a creditor to take aggressive enforcement action, such as sending bailiffs to seize goods or freezing your bank accounts. However, there are solutions to put your mind at ease. The first priority is to determine if the judgment was entered correctly. If you were unaware of the original claim, perhaps due to documents being sent to a previous address, there are procedural mechanisms to apply to have the judgment set aside. This process effectively cancels the judgment and reopens the case, but the court will only grant this if you act quickly after discovering the order.
Immediate legal guidance is essential to ensure your application meets the court's strict requirements.
A judgment is a major indicator of financial risk that stays on your credit report for 6 years. During this time, it can prevent you from obtaining a mortgage, securing a loan, or even getting a mobile phone contract. Many private landlords and letting agents also check these records, meaning a judgment could even stop you from renting a home.
To minimise this damage, paying the debt in full more than 30 days after the order will mark the judgment as satisfied. While the entry remains for the full 6 years, a satisfied status shows future lenders that you have fulfilled your obligations.
Contractual breaches can range from minor failures to fundamental violations that render the entire agreement void. Before initiating a formal claim, the court expects parties to follow certain Pre-Action Protocols, which involve clear correspondence detailing the breach and the resulting loss. This structured approach often provides a solution to the dispute through negotiation or mediation, and helps parties avoid the costs of litigation.
If a claim becomes necessary, the objective is to secure damages that place you in the financial position you would have been had the contract been fulfilled. Depending on the nature of the breach, other remedies may be available, such as specific performance, where the court compels the other party to complete their original obligations, or an injunction to prevent further harm.
Recovering a debt requires a careful strategy to ensure the process remains cost-effective. We begin with formal demands that comply with court standards for debt claims. If the debtor remains unresponsive, obtaining a court judgment is the next step, which then unlocks a variety of enforcement tools to turn that judgment into actual payment.
Depending on the debtor’s assets, the legal solution may involve a Charging Order to secure the debt against their property, an Attachment of Earnings to deduct payments directly from their salary, or a Third-Party Debt Order to recover funds from their bank account. In cases where a debtor is a company, insolvency-based procedures like a Winding-Up Petition can also be considered as a powerful means of prompting payment.
A limitation period is a statutory deadline imposed by the Limitation Act 1980, typically giving you 6 years from the date of a breach or damage to issue a claim. Once this period expires, the claim is time-barred, and the other side will have an absolute defence to block your case, regardless of its merits.
Because these deadlines are non-negotiable, waiting too long can mean losing your right to justice entirely. We recommend a prompt review of any potential claim to ensure you meet all statutory time limits and protect your ability to recover your losses.
