MANY more company directors may go to jail for fraudulently claiming coronavirus bounce back loans, an insolvency practitioner has said.

Abdulrazag Zagroba, 54, was sentenced to two years in prison by Manchester Crown Court following the first successful prosecution of a fraud case involving the Covid loans.

The court heard he applied for a bounce back loan of £20,000 without telling the bank that he had applied less than two weeks earlier to dissolve his business Amigo Pizza (Manchester) Ltd.

The terms of the loan said it could only be used for business purposes, but when interviewed under caution by Insolvency Service investigators, Zagroba admitted he never intended to use it for business.

He claimed he arranged for friends to travel with around £14,000 in cash to give to his family abroad, and that he used £6,000 to buy a car and insurance.

Antony Batty, insolvency practitioner at Antony Batty & Co, which has an office Bournemouth, said: “This represents a milestone and has been a long time in coming. Indications are there will be many more.

"It also shows the powers that the Insolvency Service has at its disposal.”

Antony Batty said many thousands of businesses which took out the loans legitimately faced not being able to repay them.

The insolvency specialist urged directors to contact their lender, who would advise them about their options, including “pay as you grow” (PAYG) options introduced by then-chancellor Rishi Sunak in September 2020.

The PAYG options include extending a loan term to 10 years from the original six; reducing monthly repayments for six months by paying interest only; and taking a repayment holiday for up to six months.

If PAYG options are not enough, professionals could advise on ways of turning around a business, including creditor negotiations, refinancing, or a restructure using a company voluntary arrangement (CVA).

Julie Barnes, chief investigator at the Insolvency Service, said after the Zagbroba case: “Covid loans were designed to support viable businesses during the pandemic. Abdulrazag Zagroba, however, cynically sought to exploit the covid loan scheme and by dissolving his company, he intended to frustrate any attempt by the lender from taking action to recover the outstanding loan.

“This sentence should serve as a warning to others who engaged in this behaviour, and they should come clean and repay the money before it is too late.”