The Secretary of State for Business and Trade v Bozhidar Genov

(Approved Transcript) ICC JUDGE GREENWOOD: Introduction and Background

1. This was the trial of the Secretary of State’s claim against the Defendant, Mr Bozhidar Genov, for a disqualification order pursuant to section 6 of the Company Directors Disqualification Act 1986 (“ the CDDA ”) and for a compensation order under section 15A.

2. The Claimant sought a disqualification order for a period of 10 years and a compensation order in the sum of £33,726 (plus interest).

3. The Claimant was represented by Ms Giselle McGowen of counsel; Mr Genov appeared in person.

4. The sole ground of the claim was summarised at paragraph 8 of the first affirmation of Mr Robert Clarke, a Chief Investigator at the Investigations and Enforcement Directorate of the Insolvency Service.

5. It was, in summary, that the Defendant caused BG Travel Limited (“ the Company ”) to obtain a Bounce Back Loan in the sum of £45,000 using an overstated turnover figure in the loan application, with the consequence that the Company received £33,726 more than it was entitled to under the Bounce Back Loan Scheme (“ the BBL Scheme ”). The Claimant’s case was that the Defendant either knew that the turnover figure was overstated, or certainly ought to have known, and that in either case, his conduct renders him unfit within the meaning of the CDDA.

6. The background was as follows.

7. The Company was incorporated on 9 January 2014, and provided chauffeur services and in addition, as Mr Genov explained today, certain concierge services, assisting clients with their needs more generally, for example, in relation to accommodation. The Company had a single vehicle but also used other individuals to act as chauffeurs albeit none were employed by the Company; Mr Genov told the court that the Company had no staff and indeed no employees apart from himself, and that he was its sole director from incorporation onwards .

8. The Company entered creditors’ voluntary liquidation on 22 March 2022, with Robert Dymond and Gemma Roberts appointed as joint liquidators. In their report of 9 March 2022, between paragraphs 3.1 and 3.5, they said as follows: 3.1 BG Travel Ltd ("the Company") was incorporated on 9 January 2014 with Bozhidar Genov appointed as sole director and shareholder. The Company changed its name to Vidaport Ltd on 26 March 2020 until 19 June 2020 when it changed back to its current name. The Company commenced trading upon incorporation specialising in chauffeur services with a client base of mainly international travellers. 3.2 The Company traded well until the Covid-19 pandemic in March 2020. Due to the restrictions imposed on foreign travel, business dropped off significantly. The restrictions took the same effect in the UK with many business forced to close, the need for taxi and chauffeur services was not required. 3.3 The Company obtained a BBL loan in May 2020 which was mainly used to pay sub-contractors and maintain the Company vehicle. 3.4 With there being no signs of the travel restrictions improving and the uncertainty surrounding travel, the director acknowledged the Company was no longer viable and decided to cease trading in May 2021. 3.5 On 4 October 2021 the Company sought professional advice by contacting Wilson Field Limited. Following on from this, Wilson Field Limited were instructed on 5 October 2021 by Bozhidar Genov, the director of the Company, to assist in the preparation of a Statement of Affairs … and convening a decision procedure of creditors to appoint Joint Liquidators.

9. The statement of affairs as at 9 March 2022, signed by Mr Genov, recorded assets with an estimated realisable value of nil and creditors of £45,433.40, leaving a deficiency as regards creditors of £45,433.40.

10. The liquidators’ final account prior to dissolution recorded realisations of nil and creditor claims outstanding of £45,433.40. It was not in dispute that the Company was insolvent.

11. The liquidators’ final account reported that the remaining assets of the Company had been disclaimed due to their low value, and that claims totalling £46,008.72 had been received from two unsecured creditors. It also gave notice that no dividend would be declared to unsecured creditors because no funds had been realised. It further reported that the liquidators would not be remunerated for administering the liquidation due to insufficient asset realisation and that their firm’s fee for assisting with placing the Company into liquidation of £2,500 plus expenses plus VAT (I think a sum of £3,000 altogether) had been paid by Mr Genov personally – a point which, as I shall explain, he referred to as at least mitigating conduct.

12. The Company was dissolved on 23 June 2023; these proceedings began on 22 February 2024.

13. The BBL Scheme was introduced, as is well known, in May 2020 to help businesses affected by the Covid-19 pandemic. Under that Scheme, a business could apply to certain accredited lenders for a loan of between £2,000 and £50,000, up to a maximum of 25 per cent of the business’s annual turnover for the 2019 calendar year. If a business had been established after 1 January 2019, but only in that case, estimated turnover for the 12-month period from the start of the business could be used. In any event, the estimate was of past turnover, not future turnover.

14. Businesses were required to complete a short online application form and self-declare their eligibility for the Scheme; it operated therefore, to that significant extent, on the basis of trust. Lenders benefitted from a 100 percent government-backed guarantee for the sums loaned and were not permitted to require personal guarantees for the loans. A useful overview of the BBL Scheme was set out by Deputy ICCJ Parfitt in Re St Aimie’s Sports Academy Community Interest Group [2024] EWHC 3137 (Ch) at [17]-[23].

15. On 7 May 2020, the Company applied for a BBL of £45,000 from Lloyds Bank plc (‘ Lloyds ’).

16. The evidence was that Lloyds did not retain copies of the completed BBL application form. They were however able to provide the following in respect of the Company’s application, all of which were in evidence: 16.1. first, a document with a summary of the information provided in the Company’s application – in other words, an application of the sort that would have been used; 16.2. second, a walk-through document showing the Lloyds’s BBL application form but annotated with descriptors for individual questions; and, 16.3. third, a spreadsheet indicating the actual answers given by the Company on its BBL application (by reference to the various descriptors).

17. The Company’s BBL application form was completed online by Mr Genov himself – that was common ground. Within the form, by the answers he gave, he stated that the Company’s turnover for the 2019 calendar year was £180,000; he confirmed that the £45,000 loan amount sought was equal to or less than 25 per cent of the Company’s annual turnover for 2019, and he confirmed that the information provided in the application was complete and accurate.

18. The Company’s application for a BBL was successful; it received a £45,000 BBL into its account at Lloyds on 11 May 2020. The Report to Creditors stated that the BBL was mainly used to pay sub-contractors and to maintain the Company’s vehicle. In the present proceedings, there was no allegation that the money was misused, or that it was used for some personal purpose or for a purpose other than those of the Company; it was not alleged that Mr Genov benefitted personally from the Loan, other than by virtue of the fact that for some time, the Company was able to survive in the obviously difficult circumstances of the pandemic.

19. However, the full BBL amount of £45,000 (plus accrued interest) remained outstanding at the date of the Company’s liquidation; the Statement of Affairs recorded the sum due in respect of the BBL as £45,377.17.

20. The Company filed annual accounts in respect of all periods from its incorporation to 31 January 2020; its accounting year was from 1 February to 31 January each year.

21. The Company’s last filed accounts - before it went into CVL - were for the year from 1 February 2019 to 31 January 2020 and they were approved by Mr Genov on 25 November 2020. The income statement within those accounts recorded a turnover of £45,097 in the year from 1 February 2018 to 31 January 2019 and a turnover of £19,158 in the year from 1 February 2019 to 31 January 2020; those figures – which were confirmed by Mr Genov in his oral evidence - contrasted markedly with that which he had included in the application form which resulted in the BBL. The Company’s accounts for the year from 1 February 2018 to 31 January 2019 were approved by Mr Genov on 25 October 2019, about 6 months before the BBL application was made.

22. Also in evidence were copies of bank statements for the Company’s Lloyds account for the period from 1 January 2019 to 28 February 2020. The Claimant’s analysis of all receipts into the account in the 2019 calendar year showed total receipts of £24,071.33 broken down into sales income of £16,203, payments from HMRC of £5,442 and capital payments Mr Genov of £2,426 – that analysis was not disputed.

23. Given the turnover figures stated in the Accounts for the accounting years from 1 February 2018 to 31 January 2019, and from 1 February 2019 to 31 January 2020, and given also the sums recorded as having been received into the Company’s Lloyds account in the 2019 calendar year, the Claimant’s case was that Mr Genov caused the Company to overstate its turnover when applying for the BBL, resulting in the Company receiving a greater sum than that to which it was entitled.

24. In calculating the amount - £33,726 - which the Company received in excess of its maximum entitlement, the Claimant used the most generous figure of the three that I have referred to, being the turnover figure in the Company’s 2019 accounts, albeit that actual turnover in respect of the calendar year 2019, as I shall explain, appeared to have been lower.

25. The Claimant further said that this conduct caused loss to Lloyds in the amount of the sums received by the Company in excess of its entitlement, plus the unpaid interest payable on the loan - and that if not Lloyds, the British Business Bank had suffered in that sum, if the government guarantee were to be called upon.

26. In the acknowledgement of service filed in response to the director disqualification element of the Claim, Mr Genov did not dispute that his conduct was as alleged in support of the Claim. He did however dispute that this conduct makes him unfit to be involved in the management of a company.

27. Essentially, his case was that the admitted overstatement of turnover was unintentional, at a time of very great anxiety, and that he had mistakenly used an estimated prospective turnover figure, based, he said, on the number of enquiries that the Company had recently received before the application was made, and at a time before lockdowns severely restricted his business. Mr Genov also advanced various other matters by way of mitigation and said that the disqualification period sought was disproportionate when compared with that imposed in other cases. He urged me not to judge harshly with the benefit of hindsight.

28. Finally, he said that he is now a mortgage adviser, equity release adviser and financial adviser which requires him to conduct due diligence on clients, assess their financial issues and gather and complete fact-finding forms for clients to ensure that the products he recommends are suitable, and that the order sought would unduly interfere with his efforts to recover his working life since the Company’s demise.

29. In the acknowledgment of service filed in response to the compensation order claim, Mr Genov disputed that his conduct caused loss to one or more creditor, although his evidence did not address that issue specifically.

30. The court heard evidence from Mr Clarke – who was only very briefly cross-examined by Mr Genov, and also from Mr Genov himself. In many respects, I found Mr Genov to be an honest and co-operative witness, a plainly intelligent person, who regrets having placed himself in his current position; on certain points however, I have felt compelled to reject his evidence as inherently improbable. The Law

31. The principles in relation to the disqualification regime were not in issue. For present purposes they were uncontroversial.

32. Pursuant to section 6 of the CDDA, the court shall make a disqualification order against a person on an application where it is satisfied that: 32.1. the person is or has been a director of a company which has at any time become insolvent (including entering liquidation at a time when its assets were insufficient for the payment of its debts, liabilities and expenses of the winding-up) and, 32.2. that his conduct as a director of that company makes him unfit to be concerned in the management of a company.

33. In the present case, these requirements were not in dispute: Mr Genov was a de jure director of the Company, which entered liquidation at a time when its assets were insufficient for the payment of its debts, liabilities and the expenses of the winding up.

34. As to the meaning of unfitness, in Re Sevenoaks Stationers (Retail) Ltd [1991] Ch. 164 at 176B-C, the Court of Appeal held that: “ The test laid down in section 6 … is whether the person's conduct as a director of the company or companies in question "makes him unfit to be concerned in the management of a company." These are ordinary words of the English language and they should be simple to apply in most cases. It is important to hold to those words in each case .”

35. In Re Structural Concrete Ltd [2001] BCC 578 at 586E-G, Blackburne J held that consideration of the issue of unfitness involved a three-stage process: 35.1. Do the matters relied upon amount to misconduct? 35.2. If they do, do they justify a finding of unfitness? 35.3. If they do, what period of disqualification, being not less than 2 years should result?

36. In Re Grayan Building Services Ltd [1995] Ch 241 at 253E, Hoffman LJ (as he then was) observed: “ The court is concerned solely with the conduct specified by the Secretary of State or official receiver under rule 3(3) of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987. It must decide whether that conduct, viewed cumulatively and taking into account any extenuating circumstances, has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies.”

37. In Re DEEA Construct Ltd [2023] EWHC 2084 (Ch) , Chief ICCJ Briggs held that a director had fallen below the standards of probity and competence appropriate for persons fit to be directors of companies where the director had given an inflated turnover when applying for a BBL and the loan obtained under the Scheme had not been used for the purpose for which it had been made (at [19]-[21]). Judge Briggs commented that the false representation had been made at a time when the government placed trust and confidence in directors of companies for the purpose of honestly representing their financial status in order that they may obtain financial support to allow companies to be maintained and survive government-imposed restrictions.

38. In Re Tundrill Ltd [2023] EWHC 3241 (Ch) , ICCJ Burton concluded that a director who had caused a company to fraudulently apply for a BBL on the basis of an estimated turnover that he knew or ought to have known the company had no realistic prospect of achieving and caused the company to use the funds for his personal benefit had fallen below the standards of probity and competence of persons fit to be directors of companies (at [62]-[67]).

39. In Re St Aimie’s , referred to above, Deputy Judge Parfitt concluded that a director’s knowing overstatement of the company’s turnover on a BBL application form was misconduct, the director having breached the trust placed in him by the government at a time of national emergency and not having shown the required level of “ responsibility ” towards his obligation to tell the truth on the BBL application form (at [67]). Further, he held that the misstatement of turnover in that case crossed the line and demonstrated unfitness to be concerned in the management of companies in circumstances where it had been made knowingly and that as a result the company had received more than it was entitled to receive, notwithstanding that it was only one instance of misconduct in the context of a now closed scheme so that there was no risk of the particular misconduct recurring. He held that the misconduct seemed indicative of an attitude to the responsibilities of being a director which was not consistent with commercial morality and was deserving of serious sanction (at [68]-[69]).

40. In addition, Deputy Judge Parfitt referred to Judge Briggs’ comments in Re DEEA , noting that the reference to trust and confidence was a corollary of the self-certification application process for BBLs, where the whole process was streamlined with fewer checks and with information not being subjected to the usual level of scrutiny. Further, he said that truthful answers were the only effective safety mechanism, and that government money was being staked on those answers (at [61]-[63]). He commented that it seemed to him that knowingly providing false information as to turnover in a BBL application was likely to be misconduct, and potentially serious misconduct depending on the circumstances of the case and that unfitness was likely to be shown if a director’s misconduct involved falsely obtaining a government-backed loan, personally shielded by limited liability, at a time of national emergency, exploiting a lack of scrutiny which was designed to assist those most in need of help (at [65]). Further, that whilst these were special features of cases involving BBLs, they reflected long-standing principles of the disqualification regime as explained in Re Swift 736 Ltd [1993] BCC 312 (at [66].

41. Also referred to was the recent, similar decision of ICCJ Barber in Re UK Dream House Ltd [2025] EWHC 98. The Present Case

42. In my judgment, Mr Genov’s conduct in the present case does make him unfit to be concerned in the management of a company for the following reasons.

43. It was not disputed that it was Mr Genov who applied for the BBL on behalf of the Company. As the Company’s sole director and the person who completed the application, he had a responsibility - which I did not understand him to shirk - to ensure that he understood the terms of the borrowing that the Company was applying for and that he did not cause the Company to borrow monies to which it was not entitled.

44. Further, it was objectively and indeed abundantly clear on the face of the BBL application form that, where a business had been established by 1 January 2019, as it was in this case, the maximum amount that a company could borrow was 25 percent of its turnover for the 2019 calendar year (or £50,000 if lower).

45. Accordingly, the Company was entitled to a BBL in the maximum amount of 25 percent of its actual turnover in the 2019 calendar year. As the person who completed the BBL application form, in my judgment, realistically, Mr Genov must have been aware of that fact; if I am wrong about that, he certainly ought to have appreciated it.

46. When completing the BBL application form, Mr Genov gave a turnover figure for the Company for the 2019 calendar year of £180,000 and confirmed that the amount that the Company was applying to borrow (£45,000) was equal to or less than 25 percent of the Company’s turnover for that calendar year.

47. He did that despite the following: 47.1. the Company’s turnover for the year 1 February 2018 to 31 January 2019 was £45,097 and the Company’s turnover for the year 1 February 2019 to 31 January 2020 was £19,158 (as subsequently recorded in the Company’s 2020 Accounts); 47.2. receipts into the Lloyds account for the 2019 calendar year, excluding payments from HMRC and capital payments from Mr Genov himself, totalled £16,203; in that regard, Mr Genov explained that in addition to payments into the account, there were certain modest cash receipts, although he could not specify their amount exactly; he did however say that the usual process was of payment into the Company’s account directly; 47.3. in those circumstances, the Company’s actual turnover for the calendar year 2019 must have been about £19-20,000 – essentially, the figure in the 2020 Accounts, minus the figure for January 2020, plus the figure for January 2019 – the latter two of which, according to the Company’s bank statements, were similar; 47.4. Mr Genov accepted that he would have known the 2019 figure – or certainly known it approximately, and in any event would have been in a position to calculate it – he explained that he had access to the Company’s bank account and that he was aware when payments were made into it; he was also the person who created and raised invoices, and kept a record of those that had been paid, and those that were outstanding.

48. Accordingly, the Company’s turnover for the 2019 calendar year was not £180,000, as stated in the BBL application - or indeed anything like it - and this was something which Mr Genov, as I have said, knew at the time.

49. Accordingly, when he completed the BBL application form, he knowingly overstated the Company’s turnover, thus causing the Company to apply for a greater loan than that to which it was entitled, as again, in my judgment, he knew.

50. In so doing, Mr Genov therefore knowingly caused the Company to borrow more than it was entitled to borrow and he did so, regrettably, in the context of a scheme introduced at a time of national emergency, when the UK Government had placed trust in directors to honestly present their financial information in order that the Government could help companies to survive notwithstanding the restrictions placed upon them as a result of the pandemic, with truthful answers being the only effective safety mechanism for the BBL scheme.

51. To the extent that Mr Genov sought to rely on estimated turnover, the Company was not entitled to do that, and as I have said, in my judgment, he knew that, because it was clear on the face of the BBL application form. I do not accept that he simply made a “ mistake ” – that mistake would have had to be in two respects: first, that the turnover in question was future, not past, and second, that an estimate, rather than the actual figure, was appropriate at all; neither variety of mistake can realistically be made on a reading of the form. As I have said, Mr Genov is an intelligent man, and well able to understand a document of this sort.

52. In any event – even if I were to accept Mr Genov’s premise – that he believed an estimate of future turnover was permissible, there was no evidence before the court of any substance to support the suggestion that an estimated £180,000 turnover was even vaguely realistic – although Mr Genov said and maintained that it was. Although he referred to enquiries, and referred to some sort of spreadsheet that he produced at the time, or perhaps later, recording their number and extent, neither the spreadsheet nor any underlying documents were in evidence, and no detailed evidence of the alleged enquiries was produced.

53. Furthermore, the Company’s historic accounts and bank statements suggested that the alleged estimate was wholly unrealistic – it would have required a tenfold increase in business compared with the previous year – as does the fact that the application was made in the midst of the pandemic, and that the business was principally that of chauffeuring, which even Mr Genov accepted was very seriously affected, for obvious reasons, by the restrictions imposed by government, the restrictions which led eventually, as I have said, to the Company’s demise. In any event, given my findings that Mr Genov knew that an estimate was not appropriate, this issue was not one of direct relevance.

54. Mr Genov accepted that in May 2020 the Company required a significant sum (far more than it was entitled to in fact under the BBL Scheme) in order to survive – he said that the BBL was the Company’s “ only last chance to survive ” – it had debts and its business was affected by the pandemic; he was under personal pressure; I think it is more likely than not that he used the figure of £180,000 in a sense mathematically, in order to support an application for the sum which he in fact required, rather than the sum to which the Company was entitled. It was not an excuse that the Scheme was easily exploited – it was that fact which imposed on applicants the particular need for honesty and care.

55. In summary, it was Mr Genov, as the Company’s sole director and the person completing the BBL application form, who was responsible for ensuring that the information provided was accurate and that the Company only borrowed a sum to which it was entitled.

56. He must (or at least ought to) have known that the information he was putting on the BBL application form was incorrect and that the loan that the Company would obtain as a consequence was more than it was entitled to. In those circumstances, in my judgment his conduct fell below the standards of probity and competence appropriate for persons fit to be a director of a company and a disqualification order is a mandatory consequence. Period of disqualification

57. Where the court makes a disqualification order pursuant to section 6 of the CDDA, the minimum period of disqualification is 2 years and the maximum period is 15 years.

58. In Re Sevenoaks Stationers (Retail) Ltd , Dillon LJ (with whom Butler-Sloss and Staughton LJJ agreed) held (at 174E-G): “ I would for my part endorse the division of the potential 15-year disqualification period into three brackets … (i) the top bracket of disqualification for periods over 10 years should be reserved for particularly serious cases. These may include cases where a director who has already had one period of disqualification imposed on him falls to be disqualified yet again. (ii) The minimum bracket of two to five years' disqualification should be applied where, though disqualification is mandatory, the case is, relatively, not very serious. (iii) The middle bracket of disqualification for from six to 10 years should apply for serious cases which do not merit the top bracket .”

59. The Claimant’s case was that Mr Genov’s conduct fell at the top of the middle bracket, being serious but not meriting the top bracket, and that a disqualification order for a period of 10 years would be appropriate.

60. Miss McGown took me to various cases - acknowledging that as is always the case in respect of the appropriate period each case must be decided on its own facts; the exercise is fact sensitive; previous cases can be used essentially as illustrations.

61. Nonetheless, it is, I think, instructive to consider the outcome of previous cases involving bounce back loans and, if possible, to act in a way consistent with the outcomes of those cases.

62. Turning to those cases: the first was Re DEEA . In that case, there was a false representation of turnover but there were two other allegations also. Unlike this case, there was an allegation of personal use by the director and, indeed, there were no available or adequate company records, and the director had failed to co-operate with the office holder. So there were differences between that and this case. In that case, Judge Briggs imposed an order of thirteen years.

63. The second is the case of Re Tundrill . In that case, the Judge imposed an order of eleven years. That was a case in which the director knew, or ought to have known, that the estimate which he had used was wrong. It was a case in which the Defendant had relied on advice and that much was accepted, I think, by the Judge. But even on the basis of that advice, he had provided an estimate that was entirely unrealistic and unachievable. It was also a case in which there had been personal benefit to the defendant director - as I say, unlike the present case - and it was also a case in which there had been a variety of untruthful departure from evidence previously produced to the officeholder.

64. Then, in the St Aimie’s case, an eight year period was imposed. There had been a false statement and a breach of the scheme rules. I think £25,000 had been borrowed by the company and that was twice as much as the permissible sum. The judge found that it was knowingly a breach, but on the other hand also took into account the fact that the business of the company was of some societal value. It provided coaching and other services, perhaps, to disadvantaged children, so as I say it had some wider societal benefit. The judge also took into account the naivety of the director and that the case was in respect of a single offence, as in the present case. The Judge also referred to the fact that the loan sought was not in the maximum sum that could have been sought.

65. Finally, Re UK Dreamhouse , was, I think, not dissimilar to the present case. In that case, there had been an overstatement of turnover, as in the present case. The sum borrowed was £20,000 on the basis of a statement of turnover of £80,000, rather than the true turnover which would have produced a permissible loan in the sum of about £3,000 to £5,000. In that case, Judge Barber imposed a nine year disqualification period and she took into account the serious nature of the conduct at a time of national crisis. She also took into account other factors such as, for example, that there was some legitimate turnover; it was not a case in which the idea of a viable business actually producing money was a figment of the applicant’s imagination. She took into account also that there was a single allegation, unlike, as I have said, some of the other cases, such as Re DEEA and Re Tundrill and she took into account that there had been some contrition expressed by the defendant as to hardship.

66. So in the present case, what is said by Ms McGowan is that the order should be in the middle bracket, and I agree with that. She said that, as was accepted by Judge Barber and I also accept, the conduct was of a serious nature. That, it seems to me, is really the most important point in this case. Again, as did Judge Barber, I would emphasise that this was in the context of a government scheme which, in particular, required directors to act with honesty and to respect the trust that had been conferred on them.

67. In the present case £45,000 was borrowed, which was close to the maximum amount that could have been sought, and almost ten times as much as it would have been permissible to borrow. I do take into account that, as I have said now a number of times, Mr Genov did not seek to use this money for personal purposes. I do not attach any real significance to the fact that pre-liquidation costs were met by Genov. It was not such as to compensate any of those who suffered losses, but I do bear in mind that it was a single instance of wrongdoing and a single allegation.

68. So, in those circumstances, it seems to me that consistently with the cases that I have referred to, the appropriate period in this case is nine years and it is for that period that I make a disqualification order. Compensation Order

69. The Claimant also sought a compensation order, that Mr Genov should pay £33,726 (plus interest at a rate of 2.5% from the date the BBL was obtained) to the Claimant for the benefit of Lloyds (or the British Business Bank if the guarantee has been called upon) pursuant to section 15A of the CDDA.

70. Pursuant to section 15A, a court may make a compensation order against a person if it is satisfied that: 70.1. the person is subject to a disqualification order under the CDDA; and 70.2. conduct for which the person is subject to the order has caused loss to one or more creditors of an insolvent company (insolvent company having the same meaning as in section 6 of the CDDA) of which the person has, at any time, been a director.

71. Pursuant to section15B(1), a compensation order is an order requiring the person against whom it is made to pay an amount specified in the order to the Claimant (for the benefit of a creditor, creditors, or class or classes of creditors specified in the order) or as a contribution to the assets of a specified company.

72. Pursuant to section 15B(3) of the CDDA, when specifying the amount of any compensation order, the court must, in particular, have regard to: 72.1. the amount of the loss caused; 72.2. the nature of the misconduct; and, 72.3. whether the person has made any other financial contribution in recompense for the conduct.

73. I was referred to various authorities in which comments have been made in relation to the court’s powers under section 15A, for example, the useful comments of Barber in Re Pure Zanzibar Ltd [2023] EWHC 2284 (Ch) , at [25], [26] and [79].

74. In my judgment, in the exercise of the power conferred by those provisions, the following matters ought to be borne in mind.

75. First , the jurisdiction is self-standing: although it requires, as a pre-condition, that a disqualification order has been made, or an undertaking given, it fulfils an essentially different purpose and serves a different function. 75.1. Disqualification is for the protection of the public, by means of prevention, and deterrence - both of the particular person and more generally, to deter misconduct by others; disqualification is concerned with setting and raising standards of managerial conduct. 75.2. A compensation order on the other hand is concerned with compensating creditors who have suffered discernible financial loss caused by established misconduct; the power under section 15A is a separate power that exists in parallel to disqualification, but only incidentally, if at all, serves the purposes of disqualification; it can be exercised on a separate application made apart from that which resulted in disqualification, and in the period of two years following disqualification. 75.3. It is important, in my view, to hold in mind these distinct purposes, in particular in deciding what is relevant to any exercise of the court’s discretion.

76. Moreover, the power under section 15A is different from those which otherwise exist in the context of insolvent companies: 76.1. it enables compensation to be given notwithstanding that the compensated person was not directly owed a duty by the director (by contrast with, for example, section 212 of the Insolvency Act 1986 (“ the IA 1986 ”) which enables an office holder to claim in respect of duties owed to the company); 76.2. it is not necessary to prove loss to the company; 76.3. it enables payment for the benefit of specific persons, or classes of person (by contrast with, for example, sections 213 and 214 of the IA 1986 ); and, 76.4. it is exercisable on the application of the Secretary of State, not by the liquidator or other office holder.

77. Second , the power depends upon establishing loss caused by particular misconduct, but there is no requirement that the misconduct be the only or predominant cause. This element requires, at least, that the misconduct be a cause in fact of the loss – a “but for” cause – but it seems to me that there must also be room, in appropriate cases, for the application of other limiting concepts, such as, or analogous to, for example, remoteness and what is sometimes referred to as causation in law. The relevance of these and similar concepts will need to be worked out in appropriate and particular cases. For example, in a case such as that presently before the court, had the Company traded very successfully for a period, albeit using the money wrongfully obtained, but then suffered a catastrophic loss, caused by some wholly unconnected circumstance, such as a fire, there might have arisen issues about the extent to which the disqualified director ought to be held responsible for the creditors’ losses.

78. Third , the court must have regard to the nature of the misconduct. That must entail a consideration of its seriousness, and its character – for example, whether it was fraudulent dishonest or negligent, and the extent of the disqualified person’s involvement, and responsibility for the alleged loss.

79. Finally , the jurisdiction is discretionary – it is one that “ may ” be exercised by the court, as for example, as a matter of language, are the powers under sections 212 , 213 and 214 of the IA 1986 . However, that is not to say that the discretion under section 15A might be exercised in some unprincipled fashion: the matters relevant to the exercise of the court’s discretion (and to its scope) are determined according to the purpose of the power, which is, fundamentally, as I have said, to compensate creditors for loss caused by established misconduct. As made explicit by section 15B(3)(c), the court must have regard to any recompense already given: there cannot be double recovery.

80. For my own part, I would not think it of particular if any relevance that a liquidator has - for whatever reason - neglected or declined to bring proceedings of his own that might have had some impact on the loss suffered, and neither would I think that the impecuniosity of the defendant would have any obvious bearing on the court’s discretion, any more so than in cases under, for example, sections 213 and 214. In that respect I note that an order under section 15 is provable as a debt in bankruptcy; the Act therefore specifically contemplates an order being made against or at least being enforceable against an insolvent person or his estate.

81. In the present case, I have made a disqualification order, and I am satisfied that there is a relevant loss suffered by Lloyds or the British Bank. In issue was whether that loss was caused by the misconduct. In my judgment it was. There was a direct causal link between the loan improperly obtained and the loss suffered in the sum of the unpaid loan; no intervening event or circumstance was drawn to my attention.

82. Insofar as I have a discretion I take into account the serious nature of the misconduct that I have described; I take also into account that Mr Genov was solely responsible for the misconduct and that his conduct was knowing.

83. In the circumstances it seems to me correct to make the order sought by the Secretary of State in the sum lent in excess of that to which the Company was entitled, plus interest, such sums not having been repaid and there being no other prospect of repayment. Judgment is given accordingly. Date: 24 January 2025