Manufacturing boss banned over £137k covid loan abuse

Manufacturing boss banned over £137k covid loan abuse

Jun 24, 2024

A Warwickshire director has been banned for seven years after persuading banks to lend a manufacturing company £137k during the pandemic when it was about to go bust

Helen Anderson, 39, was a director of Paranoid Expedition Engineering Ltd (PEEL), which traded as Paranoid Industries from four sites in Bidford-on-Avon in Warwickshire. The company was set up in June 2014 and specialised in the manufacture of parts and accessories for vehicles, and vehicle maintenance and repair.

When the company went into administration in January 2021, an Insolvency Service investigation was launched.

This found that when PEEL was insolvent Anderson made payments totalling £137,810 to an associated company where she was a director and shareholder, to the detriment of the general body of creditors of PEEL.

‘Anderson knew or ought to have concluded that PEEL had no reasonable prospect of success,’ the Insolvency Service said.

The payments were made using the proceeds from various Covid loan schemes in breach of loan agreements with the banks.

On 23 April 2020, Anderson applied for a coronavirus business interruption loan (CBIL) of £105,000.

The terms of the loan stated it was to be used for working capital and to pay off two existing loans with the same lender. These funds were applied in part to extinguish two existing loans with the same lender, totalling £45,000, and the remaining £60,729 was paid into PEEL’s bank account on 4 June 2020.

Not satisfied with the CBIL loan, within 10 days of the government launching bounce back loans on 4 May, Anderson applied for the maximum loan of £50,000 and this was paid into PEEL’s bank account on 14 May 2020 by HSBC bank.

When signing the loan agreement, PEEL agreed only to use the loan provided for the purpose of providing an economic benefit to its business.

By 8 June 2020, PEEL had effectively ceased trading and the company was in default or arrears with several creditors.

Between 8 June 2020 and 12 September 2020, PEEL made payments totalling £137,810 to a connected company where Anderson was a director and shareholder.

Over a seven-month period until the company’s administration on 13 January 2021, a total of £164,112 was paid out of PEEL’s bank account. Of this, £137,810 was paid to the associated company.

On 13 January 2021, PEEL appointed insolvency practitioners from Poppleton & Appleby and entered administration on the application of one of Anderson’s co-directors, Robert Pearson, in his capacity as a creditor of the company.

The last set company accounts were filed on 29 February 2020 for year end 31 May 2019, and Poppleton & Appleby administrators noted the ‘uncertainty relating to the company’s full financial affairs’ when it took on the administration appointment following a court order.

When the company collapsed it had £14,900 in the bank, but this was retained by HSBC which sought to apply set off in relation to the balance of the bounce back loan. Rent had also not been paid on four premises, so the landlords withheld a £12,000 rent deposit.

HMRC was owed £11,997 for unpaid PAYE and national insurance contributions, while the administrators also discovered correspondence from HMRC for non-submission of VAT returns. As a secondary preferential creditor, HMRC will not be paid.

The estimated loss to creditors in administration is £1,340,079, including £243,719 in directors loans which will not be recoverable. There was still £77,653 outstanding on the CBIL loan from Funding Circle, while trade creditors were owed over £200,000.