Liquidation and Bounce Back Loan Impact?

Liquidation and Bounce Back Loan Impact? Directors concerns?

Can a Company Be Liquidated if I have a Bounce Back Loan?

With the ongoing Coronavirus COVID-19 pandemic impacting heavily on the economies of the world. The introduction of the bounce back loan introduced in May 2020 and Topped Up in November 2020, offering bolstering support to UK businesses struggling.

What is a Bounce Back Loan? What happens if you want to liquidate your company after receiving a bounce back the loan? 

Information on Bounce Back Loans and company liquidation for concerned directors:

Directors Concerned

What then is a Bounce Back Loan?

Following the critique of the Coronavirus Business Interruption Loan Scheme (CBILS), the UK chancellor declared the Bounce Back Loan Scheme to bolster small businesses throughout the UK to obtain access to funds faster. Initially, set up to expedite and simplify the loan applications method for UK business.

Qualifying applicants may apply for bounce back loans up to 25% of their net turnover, capping £50,000. The loan has no interest or fees to pay in year one.

The Scheme proves popular, as banks require no personal guarantee. The Government guarantees the loan 100%

The Coronavirus Business Interruption Loan Scheme, however, offers guarantees of 80% in the event of failure to repay.

Bounce Back Loans – What they may and may not be used for? 

Bounce Back Loans received must provide benefit to the business.

Benefits to a business. This could include various things, from boosting cash flow to paying bills and paying salaries.

The loan may replace existing borrowing!

The loans are considerably cheaper than commercial loans, and help reduce businesses’ operating costs. However, rumours suggest that some directors have used loans for personal use. The impact is that the directors have potentially created an overdrawn directors loan account!

Suppose if this is the case and the company fails, personal liability issues could arise – see below for more on this!

  • Do Bounce Back Loans require repayment?

    Yes; if your business still trades, your business is 100% liable to repay the loan—banks who lent the money, along with HMRC. Consider the loan as a simple loan, except guaranteed by the HM Gov. Therefore repayable and not a form of gift. 

    So then, the Limited Company fails? The protocol by lenders will follow up on loan defaults, but is still unclear. Will lenders manage the potential defaults? 

    If I can’t pay back the loan, will the Bounce Back Loan be written off?

    Yes, if insolvent. Liquidation of a company (separate legal entity) deals with the company’s debt by writing debts off along with a bounce-back loan if no funds are available? 

        • Can a director liquidate their limited company while having a Bounce Back Loan unpaid?

    Perhaps the most asked question at HBG Advisory. 

    The answer is:

    Yes, you can. 

    Often, with additional working capitals, it might be impossible to continue trading in the current climate – and if your business has become insolvent, recovery might not be an option. 

    If your company has a Bounce Back Loan, consider a Creditors Voluntary Liquidation (CVL) if your company is insolvent?  

        • So, my Bounce Back Loan. What happens if I liquidate?

    The Bounce Back Loan in a liquidation ranks as an unsecured creditor. Therefore, the liquidator may repay the lender, as they are unsecured, and then the liability rests on the HM Government as a guarantor.

    Usually, financial lenders, such as banks, have security by fixed or secured charges over business assets. So, lending large amounts of money affords them being first in line for repayment.

    However, not with a Bounce Back Loan, due to the Government, guaranteed lenders their money. Directors did not use assets to offer any security, as that was not a condition.

    So, any money available from the realisation of assets means the financial provider who made the Bounce Back Loan, therefore repaid. If not, HMRC will reimburse the lender, as per the terms of the BBLS. 

    What is the impact on me as a company director?

    Company directors have no chance of losing personal assets, as secured bank loans secured with a guarantee.

    So, debts in a liquidation, ceasing at the end of liquidation, may then commence a new business or a director of another company, providing as a former director, no issues brought to the attention of the liquidator for action against the director.

    So, directors can liquidate their companies, draw a line on debt, and not have to repay the debt and start afresh. However, borrowing money moving forward may be complex. 

    So, I remain not liable for my Bounce Back Loan personally?


When the liquidation takes effect, the lender calls in personal guarantees, and the guarantor is then liable.

However, Bounce Back Loans are 100% guaranteed by the HM Government, and do not include any personal guarantees whatsoever. 

Do there exist any exceptions?

The Scheme provides no cover for directors who with intent attempted fraudulent trading or any abuse of the terms of the Scheme, whatever.

Part of the liquidation requires the directors’ conduct investigated before the liquidator’s appointment. Any misfeasance or wrongful trading exposes the directors to personally liabilities of the company. Directors when applying for bounce-back loans were all asked to verify their companies were solvent and not insolvent when applying, and then receiving a payout.

This clause exists to inform directors that bounce back loans were not money for an already insolvent company. But to offer genuine support for struggling businesses.

However, if it is proven, directors made fraudulent applications, and knew of their company’s insolvency, or the loan remained for 100% personal gain. Then, the liquidator remains obligated to disclose this to HMRC.

What’s more, the Bounce Back Loan requires the user to provide an economic benefit to the business.

However, suppose they had prior knowledge that the company may not afford to repay the loan. In that case, a risk runs for the company directors and could expose them to a personal liability claim. 

How to close your company with a Bounce Back Loan owed?

Directors of limited companies must act quickly when financial trouble looms.

Directors priority remains to protect the creditors of the company before any other when experiencing insolvency. Failure to do so exposes directors to censure, and therefore, take immediate action even with a bounce-back loan. Seek professional advice as soon as possible. 

Further information on ‘How Do I Liquidate My Company’?

Do not avoid taking steps to secure you and your creditors’ position. Your primary concern as a director is always to protect creditors first. So, the quicker to act, the options open to you afford you greater scope.


Therefore, responding to “what is a Bounce Back Loan and can I liquidate my company if I have one?” The support preferred was introduced to help UK businesses encounter financial difficulties due to the Coronavirus pandemic. However, companies are now showing signs of insolvency despite the loan. The second lockdown added additional pressures as the pandemic continues despite news of vaccines. So directors should consider liquidation if their circumstances require such a procedure. 

If the Coronavirus COVID-19 pandemic is impacting your business, please contact HBG Advisory today for FREE, confidential support. Our experienced specialists possess years of expertise in liquidation and can extend impartial advice without obligation. Please don’t suffer alone; HBG Advisory and our team are here to help you!

HBG Advisory does not require your personal or company information to talk and answer your initial questions on your situation:

Call 0330 056 3120 or Book a VIRTUAL meeting safe and private in the privacy of your home or place of work, for assistance with a Bounce Back Loan and liquidation.