Can i dissolve my company having not paid my bounce back loan

Dissolving A Company With A Bounce Back Loan

Dissolving a company with a Bounce Back loan. Written by John A Waller. Consultant. Reviewed: July 1st, 2024.

Can you dissolve a company with a Bounce Back loan (BBL)

Yes, a company can be dissolved with a BBL.

However, this process must be legal and comply with all obligations.

Directors must note that HMRC can reinstate a dissolved company with an unpaid BBL.
Legally, a BBL is like any other debt. The UK government, not the borrower, guaranteed the loan without requiring a personal guarantee.

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.
The current pandemic has affected many businesses’ cash flow. The BBL scheme has proven insufficient during the COVID-19 pandemic, and many companies throughout the UK are insolvent. 

  • Directors seek a low-cost exit route. 
  • Dissolving a company is often considered less costly than liquidation.
  • However, this only exists if all debts are settled, and most importantly, HMRC has agreed. Changing is foolish and won’t legally close the company affairs.

If you want to close a company with a BBL, you can still eliminate debt and close.

To do so requires a creditor’s voluntary liquidation; a licensed insolvency practitioner(IP) deals with the company creditors, sells any assets to pay debts, and finally strikes the company off as part of the process.

If anxious that you may, however, not have funds, you may apply for directors redundancy payments offered by HMRC, provided:

  • Your company has traded for two years or more
  • You worked 16 hours or more for the company weekly
  • Paid through the firm’s PAYE scheme and not solely a dividend.

For further reading, please view ‘bounce back loans and liquidation‘.

Can Directors Close a Limited Company with a Bounce Back Loan?

Any limited company may close. However, directors must carry out their legal duties.

BBL is a debt like any other. However, they differ from traditional loans as they do not require the borrower to give a personal guarantee. Therefore, the lender has no security or ability to take action against individuals or, as is rumoured, repossess individuals’ homes.

If you’ve realised the company is no longer viable and want to close it then down, that’s understandable. But you’ll now need to proceed correctly, and when you have a limited company with debt, this doesn’t mean dissolving or striking off.

That option is reserved for limited companies with no debt and needs to be struck off the register at the company house.

Voluntary liquidation is the correct legal option for companies with debt.

For further reading, please view ‘how to close down an insolvent limited company‘.

What Happens if You Dissolve a Limited Company with a Bounce Back Loan?

If you try to strike off your company, you will receive a letter known as the ‘Objection to Company Strike Off Notice‘ despite an existing debt.

These letters indicate that Companies House has picked up debts, and your conduct is challenged.

So Companies House Striking Off  does not hold all the answers.

These objections are usually, however, from HMRC, which monitors Companies House, for companies attempting to close their company without HMRC clearance.

In the BBL case, objections will likely come from the finance provider to whom the BBL is owed. 

Notwithstanding HMRC’s guarantee of BBLs, lenders remain responsible for tracking repayment defaults and must apply their standard debt enforcement protocols.

However, strike-off action by company directors must comply with the statutory requirements to inform the company creditors. To strike off a limited company, as per the UK government site: ‘If your company has creditors, members, employees, and other creditors, then you should inform all the necessary people before applying. ‘

Can HMRC Reinstate a Dissolved Company?

Yes!

However, if struck off incorrectly, HMRC can reinstate a limited company historically removed from the company house registrar.

For company directors believing a strike-off provides a quick resolution, they should seriously note the above.

You can find the law in Section 1003 (6) of the Companies Act. 

“The liability of every company director, managing officer, and member of the company remains and may be enforced as if the company had not dissolved.” 

Will Bounce Back Loans Be Written OFF?

Will Bounce Back Loans be written off? No, as with a traditional loan, the borrower is responsible for repayment. If the borrower defaults, then the

company will be liquidated. Once liquidated, the loan is written off, providing it was used and borrowed correctly.

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