What are the implications of closing a company with a Bounce Back Loan?
The Bounce Back Loan Scheme (BBLS) provided much-needed financial support to businesses during the Covid-19 pandemic.
One of the major benefits of the scheme was the unsecured nature of Bounce Back Loans so unless you’ve provided personal guarantees for other business loans, you won’t be personally liable to repay the Bounce Back Loan if your company becomes insolvent and enters into a formal liquidation process in the vast majority of cases.
The government have produced clear guidance, however, on how those directors found guilty of fraudulently obtaining, or fraudulently using, funds from the Bounce Back Loan scheme. In instances where misconduct can be found, the power is there to disqualify those directors for up to 15 years and obtain a court order to make them personally liable for paying compensation to creditors.
Using voluntary liquidation to close a company with a Bounce Back Loan
The appointed insolvency practitioner will sell your company assets at auction to generate funds for creditors. It’s typically the case that these funds don’t repay all of a business’s debts, however, and any remaining – including the Bounce Back Loan – will be written off.
Once the IP has completed the procedure the company will then close down permanently and be removed from the Companies House register. Unless any instances of misconduct or fraud are found – such as obtaining the Bounce Back Loan fraudulently – you’ll be free to start a new venture or perhaps move into employment.
Are there any other alternatives to CVL?
Creditors’ Voluntary Liquidation is the process for insolvent businesses to close down. There is a procedure called voluntary dissolution but this is only appropriate for solvent businesses.
If you attempt to voluntarily dissolve the company when it’s insolvent – particularly if there is an outstanding Bounce Back Loan in place – you’re likely to find a creditor challenging your strike off application.
Don’t Fall Foul of Unqualified AdviceNeed to speak to someone?
With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.
We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.
Considerations when closing a company with a Bounce Back Loan
- Your conduct as a director will be investigated, but voluntarily placing your company into liquidation lowers the likelihood of misconduct allegations being made
- You may be able to claim redundancy pay as a director by following the CVL route, even though the company’s debts are written off
- It’s important not to wait for a creditor to forcibly wind up the company, as this can also lead to disqualification and personal liability
Company Closure can help you close down your company if it has an outstanding Bounce Back Loan or any other unmanageable debts. We offer free consultations and operate a broad network of offices around the UK.
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