Worried about your Bounce Back Loan or CBILS?
Confused About Liquidation?
If you’ve found yourself researching liquidation on the internet then you may be feeling more confused than before you started. There is so much conflicting advice out there it can be quite hard to understand what applies to you and your company. I’m sure you’ve got lots of questions that need answering such as ‘will I be made personally liable for the business debts?’ or ‘can you liquidate with a bounce-back loan?‘ There is a lot to think about but with honest and quality guidance, you won’t need to spend time worrying about closing your company. At Coopermurphy, we provide confidential and impartial advice to business directors so that we can help you through the whole process. Most people that worry about liquidation and company closure feel much better after even just a short conversation with one of our experts.
Confused About Liquidation?
If you’ve found yourself researching liquidation on the internet then you may be feeling more confused than before you started. There is so much conflicting advice out there it can be quite hard to understand what applies to you and your company. I’m sure you’ve got lots of questions that need answering such as ‘will I be made personally liable for the business debts?’ or ‘can you liquidate with a bounce-back loan?‘ There is a lot to think about but with honest and quality guidance, you won’t need to spend time worrying about closing your company. At Coopermurphy, we provide confidential and impartial advice to business directors so that we can help you through the whole process. Most people that worry about liquidation and company closure feel much better after even just a short conversation with one of our experts.
What exactly is a bounce back loan?
The name is a true reflection of the loan’s intention as it is designed to enable SMEs to literally ‘bounce back’ once the effects of the pandemic allow trade to re-open. The government has favourably facilitating the lending of resources to promote this to enable companies to re-establish themselves as soon as possible. The lending occurs through a bank (usually your business bank), which is secured by the government.
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Lots of directors are now asking ‘What will happen to my Bounce Back Loan if I liquidate my company?’
The bounce back loan has been 100% guaranteed by the government which made it an ideal loan for the borrowers and the lenders.
The banks don’t take any risk because it’s guaranteed by the government and the borrowers didn’t need to sign a personal guarantee so they couldn’t lose their home or any other assets if they defaulted or liquidated.
In the event of a liquidation, the Bounce Back Loan of the company becomes treated as an unsecured debt. This means that the bank that provided the Bounce Back Loan does not have any substantial claim over company assets in the event of a liquidation. As a result of this, it is entirely likely that the Bounce Back Loan will be written off in the event of the company going into liquidation.
There will, of course, be a full HMRC bounce back loan investigation conducted, and the financial history will be reviewed. In the event of the review revealing the Bounce Back Loan has been misused, then there will most likely be repercussions such as being made personally liable for the loan.
But there are some caveats…
If your company is unable to keep up with its Bounce Back Loan repayments, it is important to seek professional advice as soon as possible. The appropriate solution will depend on your company’s financial position and whether it can continue trading or needs to consider a formal insolvency procedure.
Closing a limited company with outstanding Bounce Back Loan or CBILS debt can be more complicated than a straightforward voluntary strike-off. If the company cannot repay its debts, a formal insolvency procedure may be more appropriate. Professional advice can help you understand the options available.
Bounce Back Loans were generally provided without a personal guarantee from the company’s directors. However, directors can still face personal consequences in certain circumstances, particularly where there are concerns about how the loan was obtained or used. Each situation should be reviewed individually.
If a company enters liquidation with an outstanding CBILS loan, the loan becomes part of the company’s liabilities and will be dealt with as part of the insolvency process. The treatment of the debt can depend on the circumstances surrounding the company and the borrowing.
In some circumstances, unsecured company debts may be dealt with through a formal insolvency procedure, potentially resulting in debts that cannot be recovered from the company being written off. However, this does not automatically remove every potential liability, particularly where there are concerns about misconduct or wrongful actions.
A company may be able to continue trading while experiencing difficulties with its Bounce Back Loan or CBILS repayments, but directors must carefully consider the company’s overall financial position. Continuing to trade when a company cannot pay its debts may increase the risks for directors, so professional advice should be obtained promptly.