The Bounce Back Loan scheme (BBLS) was introduced during the Coronavirus pandemic to provide financial help to struggling businesses. Continue reading to discover if you can liquidate your company if you have a BBL.

What is a Bounce Back Loan?

The BBLS was introduced to allow businesses to borrow between £2,000 to £50,000 to cover expenses relating to COVID-19. The loans were 100% government-backed for lenders, which meant company directors did not have to provide personal guarantees, and there was no need for assets to be provided as security. One of the benefits of the BBLS is companies do not have to pay any fees or interest for the first 12 months. After 12 months, you are charged a fixed annual interest rate of 2.5%.

What happens if my business cannot repay the Bounce Back Loan?

If your business is solvent but unable to meet the monthly loan repayments, the UK government offers the following options as part of the Pay as You Grow scheme:

• Extend the loan term from 6 to 10 years
• Take up to 3 periods of 6 months of interest-free only repayments during the loan time
• Request a 6-month repayment holiday (only available once)

If your business cannot repay the BBL and you have reached a state of insolvency, as a director, you have a statutory duty to put creditors first. This means:

• You should obtain the services of a licensed insolvency practitioner as soon as possible
• Inform yourself about your duties as a director during insolvency and take steps to demonstrate your intention to place creditor’s interests first
• Keep a careful note of any actions taken

Can I liquidate my limited company if I have received a Bounce Back Loan?

If your company has been hit hard by the pandemic and you are finding it difficult to trade, it is still possible to liquidate your company despite the extra support provided by the BBL. It is recommended that you seek help from a licensed insolvency practitioner as soon as possible, as they may be able to recommend a solution to avert the closure of your company.

If your business cannot be saved or a viable solution cannot be found, enlisting the help of an insolvency practitioner demonstrates your intentions to place the creditor’s interests first – a legal duty of directors of insolvent companies.

If the company has enough assets, you can close your limited company and clear any outstanding debts through a Creditors Voluntary Liquidation. Any remaining assets will then be sold, and the money will be split between the creditors in order of priority.

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

Usually, the company director would be held liable. However, this is not the case with a BBL. When you enter into liquidation, the BBL becomes an unsecured debt. This means creditors do not have substantial claims over assets belonging to the company – unlike a secured debt.

If there is money from the realisation of assets, the financial provider who made the BBL will be repaid. If the loan is unpaid, the director is not held liable. This is because the government guarantees the loans. The lender who issued the loan will pursue the government for repayment as per the terms of the BBLS.

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If you would like to find out more information about our limited company accountancy service and how we can support your business, please call us on 0808 301 2389. Alternatively, please complete the short form on our website, and one of our friendly consultants will be in touch to discuss your accountancy options.