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Can Directors Close a Business with an Outstanding Bounce Back Loan

Can I Close a Company with A Bounce Back Loan. Written by John A Waller. Director. August 1st,2022.

When operating a limited company. Any business debts, including bounce-back loans that the company cannot pay in full or partly after calculating assets and liabilities, are cancelled if the company is insolvent. 

Limited companies protect directors and shareholders due to their “limited liability structure.”

So, if you’re insolvent – meaning you cannot pay debts when due – you should contact an insolvency practitioner such as ourselves to discuss your options in the UK. The law requires the liquidation of a limited company to be carried out by a licensed insolvency practitioner, who will communicate with its creditors in the formal closure process.

Closing Company With A Bounce Back Loam

Yes, it is possible to dissolve a company with a bounce back loan.

However, this process must be legal while complying with all statutory responsibilities.

A Bounce Back Loan, from a legal perspective, is like any other debt. The difference, however, is that a personal guarantee was not required, as the UK government backed them.

Understandably, you may want to close your company when you realise it is no longer viable, but you need to follow the due and correct process.

There are two options to close a company with debts, depending on whether the company has assets:

 

Risks to directors closing a company with a bounce-back loan.

When closing a company with a bounce-back loan, three risks may apply to company directors. 

However, only two of these are no different whether your business took out a bounce-back loan or not. 

  1. The bounce back loan money has benefited you, not the company, or misrepresented or fraudulently acquired.
  2. You guaranteed other business debts, i.e. borrowings other than the bounce-back loan. Therefore, any personal guarantees require paying.
  3. You have behaved in a way that contradicts your legal obligations as a director of the company before the liquidation. This may have been by trading while insolvent, disposing of company assets at an undervalue, and acts of misfeasance.

Not closing your insolvent company because you fear that the consequences of misusing the bounce back loan can cause other problems for you. So, obtaining robust, experienced advice is essential. Contact HBG Advisory for Bounce Back Loan support on 0800 612 5448

Please note that insolvency practitioners must report fraudulent bounce back loans to HMRC. However, no action will take place if you have acted honestly in the claim.

Can I dissolve a company with a bounce back loan?

No!

Borrowers can either:

  • Commence a creditor’s voluntary liquidation (CVL) or
  • Wait for the lender to petition the court to wind up the company. So, nothing stops you from liquidating your company if it has an unpaid bounce back loan.

Bounce Back Loan advice for Company Directors

Directors should seek professional advice if they have Bounce Back Loan worries regarding repayments. The UK government introduced the COVID-19 support scheme to support businesses through the pandemic. owever, repaying the loans has been difficult. So ensure you seek advice sooner than later.
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