Re: I agree it seems like very light punishment
He would be questioned about the circumstances and exactly what happened
Perhaps. I recently had to do a background check (just the basic one although I have had SC in the past and will probably have to get it again) and you need to be able to account for the last 5 (10 for SC) years of employment (or lack thereof) and home address(es).
If you claim to have worked for a company that is now out of business, you will be asked for corroborating evidence (payslips, offer letter, resignation letter and so forth). One company I worked for was simply not contactable (they were still in business but no-one in the offices due to lockdown) and I had to provide said evidence.
Fortunately, I had kept some of the paper evidence and some electronic records that survived the last move a couple of years ago.
On the SC front, I had a (long) spent conviction from the mid 70s (young and foolish) that I declared and nothing was said about it (I am sure they looked for it though).
For those clearances, I agree that trying to hide something will most definitely be met with raised eyebrows and probable rejection.