Bounce Back Loans and Liquidation

Having Bounce Back Loans and liquidation is possible.

Bounce Back Loan Scheme (BBLS) remains extended as a top-up to January 31st 2021. The impact has been significant, allowing companies struggling with cash flow issues to move on. The deal impacts eligible businesses to borrow between £2,000 and £50,000. Put in place to ensure that companies can afford additional costs for purchasing equipment to protect the company’s staff and ensure ongoing supplies for the company’s customers. 

The bounce back loan does not protect borrowers as per the Consumer Credit Act 1974

Is Liquidation an option with a Bounce Back Loan?

Simply: YES.

The second lockdown has heavily impacted UK business. Sadly, companies are now on the brink of failure. Directors are worryingly holding back, increasing debt, and worsening creditors’ positions financially. If your company through a recovery process remains not viable, directors need to liquidate.

Liquidating voluntary against compulsory liquidation allows a company to enter creditors voluntary liquidation.

Having a Bounce Back Loan still allows a liquidation.

What happens to my Bounce Back Loan if I close my company?

Although banks are often considered secured creditors, the owed debts are fixed over company assets. However, this is not the case with a Bounce Back Loan.

If your company goes into Liquidation, your Bounce Back Loan becomes an unsecured debt. Unsecured debts are different from secured debts, where creditors like banks and factoring companies charge company assets to secure their funding. Unlike secured debts, unsecured debts, and their creditors don’t have substantial claims over company assets.

Can you write a Bounce Back Loan off?

Bounce Back Loans are not preventing companies from failing. The second wave of the Pandemic allows for a top-up of your loan. It though applies to companies who declared turnover sufficient to cover the maximum loan of £50,000. If your turnover is less, you may have received your Bounce Back Loan allocation, even though you may have taken 25% of the £50,000. So for many companies, the threat of Insolvency is real.

Giving Personal guarantees was not a requirement to qualify for a Bounce Back Loan. Therefore, the loan remains an unsecured debt and written off in a liquidation.

Once the company remains in liquidation, a primary requirement of the appointed liquidator must investigate the financial history of the company, before liquidation and throughout the Insolvency. Examining for misfeasance or fraud. If an impropriety is found, directors may be held liable for the Bounce Back Loan (As referred into the conditions of acceptance).

Do I personally remain liable for an unpaid loan?

Usually, if guaranteed personally? Then yes.

The UK Government still guarantees Bounce Back Loans

Please remember: The temporary relaxation of wrongful trading laws does not allow company directors to act fraudulently. Any appointed liquidator still subject to examination by any appointed liquidator. Aggrieved creditors may challenge directors to notify the liquidator together fraudulent Bounce Back Loans. Many directors perhaps consider the loans a “Gift” rather than a repayable “Loan”. Liquidators may issue personal liabilities orders to directors found guilty of such acts.

The Bounce Back Loan Scheme (BBLS) aims to support businesses coping with debts provoked by the Coronavirus Covid19 Pandemic. However, despite receiving the support of a Bounce Back Loan, companies are still faced due to the possible second stage of the shutdown. Liquidating, your company presents many issues for the directors in their minds. However, Bounce Back Loan should not affect the directors personally when the company liquidates?

Who then guarantees the loan?

Your company has a Bounce Back Loan; however, it does not stop the company entering liquidation. The Government only guarantees the Bounce Back Loan. Therefore, considered an unsecured debt in any form of Insolvency.

Directors have no personal liability for the loan, except if it proved directors acted of the law through misfeasance and fraudulent means.

The bank nor the Government may take no recovery action over a borrower’s primary home or private vehicle.

However, sole traders or partnerships, without any limited liability protection, may be exposed to recovery action.

The sooner a director acts, then protects creditors of the company, while ensuring little if any criticism for the directors decided to cease trading.

For further advice on the above, please contact HBG Advisory on 0800 612 5448 8 am to 8 pm seven days a week, or arrange a VIRTUAL meeting safe and private, in your home or workplace.