High Court disqualifies director over bounce back loan misconduct

23 Jan 2025Court Report

The High Court disqualified Mr Mohammad Ahmedivand for overstating turnover in a Bounce Back Loan application

Introduction

The High Court, presided over by ICC Judge Barber, has disqualified Mr Mohammad Ahmedivand from acting as a director for nine years. The judgment, handed down on 22 January 2025, found that Mr Ahmedivand had overstated the turnover of UK Dream House Ltd in a Bounce Back Loan (BBL) application, leading to the company receiving more funds than it was entitled to under the scheme.

Background

UK Dream House Ltd, incorporated in May 2018, provided bathroom renovation services. Mr Ahmedivand was the sole director from January 2020. The company entered creditors' voluntary liquidation in September 2021, with a deficiency of £39,738 reported to creditors. The Bounce Back Loan Scheme, introduced in May 2020 to support businesses affected by the Covid-19 pandemic, allowed companies to apply for loans up to 25% of their 2019 turnover.

Misconduct

The court found that Mr Ahmedivand had overstated the company's 2019 turnover as £80,000 in the BBL application, when the actual turnover was between £14,566 and £19,352. This misrepresentation resulted in the company receiving a £20,000 loan, which was more than it was entitled to. The funds were transferred to an account with the reference "Undream House" on the same day they were received.

Adjournment Request

Mr Ahmedivand did not attend the trial, having requested an adjournment citing the need for legal representation and medical issues. The court refused the adjournment, noting the late stage of the request and insufficient medical evidence to substantiate his claim of unfitness to attend. The trial proceeded in his absence.

Legal Principles

The court applied the principles from the Company Directors Disqualification Act 1986, which mandates disqualification if a director's conduct makes them unfit to manage a company. The court found that Mr Ahmedivand's actions fell below the standards of probity and competence expected of company directors, particularly in the context of the government's reliance on directors to self-certify accurately during the BBL scheme.

Conclusion

Judge Barber concluded that Mr Ahmedivand's conduct demonstrated an attitude inconsistent with commercial morality, warranting a middle bracket disqualification of nine years. The court considered the significant overstatement of turnover and the breach of trust during a national crisis as serious misconduct.

Implications

This case underscores the importance of accuracy and integrity in financial applications, particularly when government-backed schemes are involved. It serves as a cautionary tale for directors about the serious consequences of misrepresenting financial information.