Can-I-close-or-liquidate-my-company-with-a-Bounce-Back-Loan

The Bounce Back Loan Scheme (BBLS) was a vital financial lifeline for many businesses during the pandemic. However, as circumstances change, some business owners may find themselves considering closing their company. This can raise questions about the consequences of doing so with an outstanding BBL.

You may also ask, “Can you close or liquidate your company with a Bounce Back Loan?” The answer, in short, is yes. Although BBLs carry certain considerations, it is not a barrier to closing your business officially. All you need to repay the loan and that is mandatory. 

However, it’s important to understand other options available, the procedures involved, and the potential consequences, all of which we are going to describe for you in detail in this guide.

So keep on reading! 


Can I liquidate a limited company with a Bounce Back Loan?

Yes, you can liquidate a limited company with a Bounce Back Loan. However, the loan must be repaid during the liquidation process

In the UK, if you’ve taken out a Bounce Back Loan (BBL) and your limited company needs to be liquidated, the outstanding BBL debt becomes a liability during the liquidation process. 

This means that before any remaining assets are distributed to shareholders or creditors, the BBL must be repaid in full

Liquidation involves closing down the company, selling its assets to pay off debts, and distributing any remaining funds to shareholders. The repayment of the BBL is part of this process. If the company doesn’t have enough assets to cover the BBL and other debts, the directors might be personally liable for the remaining balance of the loan.

What if there aren’t any assets or funds to pay for a liquidation?

If there aren’t any assets or funds to distribute to creditors or cover liquidation costs, you might consider Administrative Dissolution. Liquidation expenses typically range from £2500 to £6000.


How do I Close My Limited Company with an Unpaid Bounce Back Loan?

Closing a limited company with an unpaid Bounce Back Loan (BBL) involves several steps and considerations:

1. Seek Professional Advice: Before taking any action, consult with a qualified accountant or insolvency practitioner. They can guide you through the process and help you understand your obligations.

2. Assess Company Finances: Review your company’s financial situation to determine if it’s insolvent. If the company cannot pay its debts as they fall due or if its liabilities exceed its assets, it may be insolvent.

3. Inform Bounce Back Loan Provider: Contact your BBL provider and inform them of your intention to close the company. Discuss repayment options and negotiate a repayment plan if necessary.

4. Explore Repayment Options: You may need to repay the BBL in full, even if the company is insolvent. Explore repayment options such as using company assets to repay the loan or negotiating a settlement with the lender.

5. Initiate Company Closure: Choose the appropriate method of closing your company, either through a formal liquidation process or a voluntary strike-off. Liquidation involves appointing a liquidator to wind up the company’s affairs and distribute assets to creditors. Voluntary strike-off is a simpler process suitable for solvent companies with no outstanding debts.

6. Follow Legal Procedures: Ensure that you follow the legal procedures for closing your company, including notifying HM Revenue & Customs (HMRC), filing final accounts and tax returns, and deregistering for VAT if applicable.

Can I strike Off my company with a Bounce Back Loan?

Yes, you can strike off your company with a Bounce Back Loan, but the loan must be repaid before the strike-off process.

In the UK, you can initiate a voluntary strike-off process to close your company if it’s solvent and has no outstanding debts, including the Bounce Back Loan (BBL). However, before applying for strike-off, you must ensure that the BBL is repaid in full or make arrangements with the lender for repayment.

During the strike-off process, you’ll need to notify all creditors, including the BBL provider, of your intention to strike off the company. If the BBL remains unpaid, it could complicate the strike-off process, and the company may not be eligible for strike-off until the loan is settled. 

Can I transfer a Bounce Back Loan to another company?

Transferring a Bounce Back Loan to another company isn’t allowed. The loan stays with the original borrowing company until it’s repaid or the company undergoes a formal insolvency process, like liquidation, concluding its existence.


What will happen to my Bounce Back Loan if I liquidate your company?

 
What will happen to my Bounce Back Loan if I liquidate your company

 

If you liquidate your company, your Bounce Back Loan (BBL) becomes a liability that needs to be addressed during the liquidation process. The outstanding amount of the BBL must be repaid from the company’s assets before any remaining funds are distributed to creditors or shareholders

During liquidation, the appointed liquidator will assess the company’s assets and liabilities, including the BBL. They will work to sell off company assets to repay debts, including the BBL, to the extent possible. 

If the proceeds from asset sales are insufficient to cover the BBL and other debts, the BBL provider may pursue the directors personally for the remaining balance, depending on the terms of the loan agreement.


What Are The Potential Drawbacks Of Liquidating A Company with a Bounce Back Loan?

Closing a company with an outstanding Bounce Back Loan (BBL) carries several risks:

1. Personal Liability: Directors may become personally liable for the unpaid BBL if the company’s assets are insufficient to cover the debt. They could be pursued for repayment by the BBL provider or liquidator, especially if there are suspicions of wrongful trading or misconduct.

2. Legal Consequences: Failure to repay the BBL before closing the company can lead to legal repercussions, including legal action by the lender, potential disqualification as a company director, or being held personally liable for the debt.

3. Credit Rating Impact: Unpaid BBLs can adversely affect the directors’ and company’s credit ratings, making it challenging to secure financing or start a new business in the future.

4. Difficulty Obtaining Credit: Directors may find it challenging to obtain credit or loans in the future if they have unresolved debts from a previous business, particularly if they are associated with a failed company with unpaid BBLs.

5. Financial Burden: Directors may face financial difficulties if they are personally liable for the outstanding BBL amount, potentially leading to bankruptcy or severe financial strain.


Am I Personally liable for an unpaid Bounce Back Loan?

Yes, as a director, you are personally liable for an unpaid Bounce Back Loan (BBL). 

The BBL scheme holds directors personally responsible for repaying the loan if the company defaults. If the company cannot repay the BBL, creditors can pursue directors individually for the outstanding debt. 

This liability extends even if the company is liquidated or dissolved. Directors must ensure timely repayment to avoid legal action, damage to personal credit ratings, and potential disqualification. 


Alternative Options If I Can’t Pay a Bounce Back Loan?

While not repaying a Bounce Back Loan (BBL) can lead to serious consequences, such as personal liability for directors, legal action from creditors, and damaged credit ratings, there are alternative options to consider before reaching that point.

Here are some steps you can take to address your BBL repayment challenges:

1. Utilize “Pay As You Grow” options: 

Introduced by the government, these options offer flexibility and breathing room:

  • Extend the loan term: Increase your repayment timeline from 6 to 10 years, reducing monthly instalments.
  • Request a repayment holiday: Take a temporary break from repayments for up to 6 months, providing short-term relief.
  • Opt for interest-only payments: Choose to pay just the interest on your loan for 6 months, up to 3 times during the term, freeing up cash flow for other pressing needs.

2. Seek professional guidance:

  • Talk to your lender: They may offer tailored solutions or connect you with a financial advisor specializing in business debt.
  • Consult an insolvency practitioner: If necessary, they can advise on formal insolvency procedures, including Company Voluntary Arrangements (CVAs) or Creditors’ Voluntary Liquidation (CVL)

When can a limited company be liquidated? 

A company can face dissolution under several circumstances:

  • If it has ceased trading or hasn’t engaged in any trade or stock sales within the last three months.
  • If the company name hasn’t been changed in the past three months.
  • If the directors intend to retire and there’s no succession plan in place.
  • If it’s a subsidiary company that’s deemed unnecessary.

If your company doesn’t meet these criteria, voluntary liquidation may be necessary instead.


Get free liquidation advice today from Vanguard Insolvency! 

If your business is struggling with debts arising from the impact of the Coronavirus, whether or not you’ve obtained a Bounce Back Loan, reach out to us at no cost on 0121 769 1915.

Our licensed insolvency practitioners possess extensive expertise in business closure and recovery. 

Our approachable advisors are ready to provide impartial advice and suggestions at no charge. Get in touch with us today to discover how we can support you during this challenging time.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.