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Bounce Back Loan Scheme Has Run Out?

Bounce Back Loan Scheme Has Run Out. Written by J A Waller, Director. Updated June 24th, 2024.

So then your company’s Bounce Back Loan Scheme Has Run Out?

Therefore, what next?

As a director of a limited company, you remain obliged to ensure that you comply with the following provisions:

  • Acting within your powers as a company director (Please read Directors Duties and Responsibilities)
  • To promote the success of your limited company while then serving as the foundation for a business;
  • Exercise independent judgement;
  • Exercise:
    • Reasonable care;
    • Skill; 
    • Diligence.
  • Avoid conflicts of interest;
  • Accept benefits from third parties.

Bounce Back Loan Scheme Has Run Out. What are my Director’s Responsibilities?

Furthermore, limited company directors, however, remain responsible for ensuring they, therefore:

  • Follow the company’s rules (as detailed in the company’s memorandum and articles of association;
  • Maintain company and accounting records and report changes;
  • File your accounts and your Company Tax Return;
  • Advise shareholders of any personal benefit from a transaction the company makes;
  • Pay the company Corporation Tax.

It is essential to understand, however, that you may, as a director, then employ a professional to act for you and the company, like accountants and lawyers. However, as a director of the company, you remain responsible for any actions or lack of action at all times. Being a director requires, therefore, diligence at all times.

Often, directors ask, can I liquidate with an unpaid bounce back loan?

Yes.

So, having stated the director’s duties and responsibilities, what may you do if your bounce-back loan has run out and the company can no longer trade? 

Your first responsibility, therefore, remains with the company’s creditors – the number one priority.

Bounce Back Loan Has Run Out, so when should a director seek insolvency advice?

A director should seek immediate advice from a licensed Insolvency Practitioner without delay.

However, the position will not improve over time. Indeed, the situation will worsen with creditors, exposing company directors to personal liability.

Acting now can save you as a director and protect creditors together.

Will I be Liable for repaying The Bounce Back Loan?

No!

When you claimed a BBL, it was on behalf of the Limited Company, not you (Bounce Back Loans and Personal Guarantees). Should the company be liquidated, the loan remains no longer the responsibility of the failed company.

The lenders of the Bounce Back Loan received a 100% government-backed guarantee for the monies advanced, and as part of the loan, they could not hold any form of security or guarantee from the borrower.

Please read ‘consequences of not repaying a bounce back loan‘.

Bounce Back Loan Scheme Has Run Out. What happens if I misused The Loan?

The Bounce Back Loan Scheme (BBLS) was set up to enable UK businesses to access finance quickly during the Coronavirus pandemic.

When the loan was taken out, the directors agreed it would only be used to provide an economic benefit to their business.

Not doing so may then expose directors to censure.

So, directors must understand the issues with Bounce Back Loan Fraud

Problems, however, rear their heads due to the:

  • Using the loan to then pay preferred creditors.

Under the Bounce Back Loan Scheme terms, funds may be used to refinance remaining company debt. However, care is required. Operating an insolvent company requires directors legally to act, therefore, in the best interests of the creditors. However, paying certain creditors while leaving others out means you may be accused of transacting preferential payments as a company director. Therefore, giving preferential payments may expose you to personal liability for company debts if it fails!

When a business begins a formal insolvency procedure, the insolvency practitioner will scrutinise transactions affected during and in the period leading up to the insolvency. If they then find evidence of preferential payments, you remain exposed to personal liability claims up to the value of those payments. It, though, does not stop there. The Insolvency Service may intervene to determine whether you should face the director’s disqualification for your actions if proven. 

  • Not applying to the company’s benefit.

Few rules establish BBL use. The primary use is designed to benefit the company, as deemed by the directors. To benefit the company economically, it would not be considered wrong to pay the business’s operating costs, purchase supplies, and, importantly, pay the company’s wages.

Sadly, it has been suggested but not proven. Company directors, however, continue to take advantage of the scheme by using the funds to purchase personal assets, invest in property and pay off personal loans. 

Should the company fail, an insolvency practitioner must be appointed to commence a formal insolvency procedure, like administration or liquidation. They will scrutinise the reasons for the company’s insolvency while also legally required to examine how the BBL was utilised. If it is, therefore, evidenced that the use of the loan was improper (Misfeance), directors will have to repay the loan and take further action. 

Bounce Back Loan Scheme Has Run Out – So what next?

Once you have consulted with a Licensed Insolvency Practitioner. They will then direct you to your next steps. Failure to act may, therefore, remove the protection of a limited liability company and potential prosecution.

Possible solutions then include:

For further reading on Bounce Back Loan Scheme and Liquidation, please click on: ‘Bounce Back Loans and Liquidation

Take care.


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