Insolvency fraud

There has been a rise in scams during the covid crises, mainly due to the growth in corporate insolvencies. Such firms try to do business while insolvent, or they apply for credit or trade when they are suspended or termed “ineligible” to get any such benefits. They claim to be into reforms only to avoid paying the creditors.  

It represents premeditated crimes driven by opportunism. It happens when counterfeit firms file for liquidation and abuse the governments’ covid support schemes. They forge documents to convince the banks that their winding-up order has been revoked, which allow transferring a huge amount out of their accounts. 

How Does It Happen?

The organisation goes bankrupt, and a new company is formed with the same directors set up to appear different from the failed one, but they are operating in the same manner with the same team. The creditors get just a percentage of the money they lend before it declares insolvency. 

The assets of the previous company are transferred to the new, and not much is left for the creditors to reclaim, so they face a loss against supplied goods or services. 

Bogus organisations sometimes pretend to be selling medical care products to secure funding offered during the pandemic by the government. 

They use fake representations to secure grants and bounce back loans. In some cases, they claimed they were operating through a reputable address that provided a bogus lease but turned out to be unoccupied. 

How To Protect Yourself?

If a firm claims to be insolvent during the epidemic (or due to natural disaster), and if they have your money, do your research to find out who are the directors to spot if they have formed any bogus organisation. If you have claims against them, do not give up on it, even when they are not liable to pay.

How To Spot It?

It is a criminal offence to contravene a disqualification or bankruptcy order or restrictions or undertaking where a disqualified person or institution tries to gain benefits through illegal trade methods. 

For example, if you have funds from an insolvent organisation and the representatives are not responding to any of your messages regarding unpaid dues or loans.

If you have offered trade credits to a new business that declines. 
If you have suffered any such fraud, report it to the authorities and raise concerns regarding the loss. If you suspect anyone, report it to the insolvency service.