Company Director Stress 7

What is a Creditors Voluntary Liquidation

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Directors' Redundancy claims possible in liquidation if employed by the company.

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What happens if the business can’t pay back its Bounce Back Loan?

What happens if business can’t pay back its Bounce Back Loan? Will I personally be liable?

Definitely No!

Individuals operating limited companies remain protected from the debts of the company.

However, this does not apply if any corporate misfeasance or wrongful trading is evident.

If none of the above exists, company directors remain secure from the company’s debt and may restart a new business.

The UK Government is coming to terms with the fact that over half of Bounce Back Loans may remain unpaid. According to the National Audit Office, £26bn of the £45bn Bounce Back Loans issued so far will never be paid off.

On October 7th 2020, the national audit office published a report,’ Investigation into the Bounce Back Loan Scheme‘. The report covered an investigation into the UK Government’s Bounce Back Loan Scheme, which began May 4th 2020. The report describes the Scheme’s:

Credit Risk and Bounce Back Loans (BBL)

When set up, the Scheme operated low-level credit and customer checks, prompting the potential risk of businesses not able to repay their BBLs, which impacts taxpayers.

Bounce Back Loans and the Risk of Fraud

The UK Government acknowledges that providing funds hastily has left UK taxpayers exposed to potential substantial fraud risk on a scale not seen before despite best efforts by the lenders.

The report highlighted through the Business Banking Resolution Service that 40 per cent of businesses or more have no intention of repaying them.

Mainly due to because:

  • Borrowers do not expect repaying their Bounce Back Loan; 
  • Borrowers believe the Government will not undertake to collect the unpaid debt.

The Government faces a quandary. Should it write off the whole of the £46bn lent? Such action would then potentially save £1bn in Business Interruption Payment (BIP) charges.

Duties of an Insolvency Practitioner and Bounce Back Loans

Once appointed, licensed insolvency practitioners remain required to investigate the company’s position before it entered the insolvency procedure. For example, should any evidence arise of company directors or shadow directors? Making fraudulent claims, and were aware of the company being insolvent. Then the liquidator must report this to HMRC.

What happens if business can’t pay back its Bounce Back Loan, and Lenders chase money owed.

Meanwhile, lenders remain ready to scrap plans to create an independent agency to pursue bad Bounce Back Loan debts and handle overdue payments themselves.

Technically, no backlashes exist should you default on your Bounce Back Loan. However, please note, with a bounce-back loan. Individuals do not secure loans. Only the UK government provides 100% backing once lenders have exhausted avenues to collect payment.

Your assets are not at risk. No lender was allowed to accept any personal guarantee or register a charge over individuals’ assets.

Bounce Back Loans also have no impact on your credit score.

Nevertheless, lenders will chase repayment as and when due in their usual manner, like eventually appointing debt collection agencies, sending threatening collection letters, even court action followed by bailiffs. However, they have no guarantee of you legally.

Therefore, if faced with this situation, act swiftly and contact the team at HBG Advisory.

The Lenders may instruct debt collectors to recover unpaid Bounce Back Loans.

What happens if business can’t pay back its Bounce Back Loan, and I have used my Loan to repay debt?

A company director managing an insolvent company has no capacity in law. Pay creditors in preference to others, unless the debt is secured. To do so, especially as a creditor, you have a personal guarantee that exposes you to wrongful trading as a director, which remains a civil offence, further challenging your exposure to financial responsibility for your limited company debt. Therefore, removing the limited corporate veil,

Along with the lenders, the Government has discussed establishing a debt collection panel governed nationally by a code of practice. Due to lenders only being to claim the Government 100-per-cent guarantee once they have exhausted all options.

Nowadays, since the last financial crisis in 2008 in the UK. Banks want to remain clear. Of bad news. As such, issues with Bounce Back Loans fall into the bad news arena. 

So can I liquidate my Limited Company?


To liquidate a limited company using a creditors voluntary liquidation for an insolvent company requires a licensed insolvency practitioner, as found in the team at HBG Advisory.

All the proven company creditors, including the lender who provided the bounce back loan, will rank for payment once the liquidator has realised all company assets and collected all monies owed to the company, enabling a distribution.

Finally, caution is required when attempting to abuse the system wrongly. 

For further detailed reading liquidation, your limited with a bounce back loan view. ‘Bounce back loans guarantees and liquidation, 

However, what could be affected is your ability to borrow money in the future, as with any default, remains recorded on your credit record. In addition, lenders signal they may not lend to an individual who has failed to pay back a bounce back loan. The Jury is out!

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