What is a Bounce Back Loan?

The Bounce Back Loan Scheme (BBL) is designed to help struggling businesses with debts incurred because of the Coronavirus. A BBL will not stop you from closing or liquidating your company, and the loan will be classed as an unsecured debt.

Important Warning
As a director, you will be personally liable for the loan is if you are found guilty of abusing the scheme or committed fraudulent trading.

What will happen to your Bounce Back Loan if your company is liquidated?

A lot of businesses struggling because of the COVID pandemic and lockdown have benefited from the Bounce Back Loan Scheme (BBLS). This scheme has shown to be a beacon of hope for these struggling businesses and allowed them to keep their doors open.

The Bounce Back Loan Scheme allows businesses that meet the criteria to borrow funds between £2,000 – £50,000 to cover additional expenses for buying equipment to protect customers and staff, and to recover from the difficulties caused by Coronavirus.

Is it possible to liquidate your company if it has taken out a Bounce Back Loan?

In short yes. This is because some businesses may still find it difficult to continue with trade during or after this turbulent period, even with the extra funds from the loan. Recovery of the business may not be suitable or realistic if your company has become insolvent (the business can’t pay its debts as and when they fall due).

If you have taken out a BBL, you can use Creditors Voluntary Liquidation (CVL) to liquidate an insolvent company.

What will happen to your Bounce Back Loan if you liquidate your company?

In the event of a company being liquidated, the Bounce Back Loan turns into unsecured debt. An unsecured debt differs from a secured debt, where company creditors take over assets belonging to the company to secure their funds. Unlike a secured debt, an unsecured debt, as well as its creditors, do not have substantial claims over assets belonging to the company.

Can you be held liable for an unpaid Bounce Back Loan?

No. Usually, in the event of a company being liquidated, any personal guarantees signed by the director to secure funding become clear and the company director is personally responsible for those funds.

Directors, however, are not liable for an unpaid Bounce Back Loan because they are 100% guaranteed by the Government and not by the director themselves. When the debt crystallises, the issuing body, creditor, or bank will request that the Government repays the loan.

Nevertheless, this, as well as the short-term relaxation of wrongful trading laws, does not mean directors will not be held accountable for actions like abuse of the Bounce Back Loan or fraudulent trading.

The conduct of the company directors are still investigated during the liquidation process and any director involved in wrongful actions or misfeasance will be held personally liable.

If your business or company is struggling with debts incurred due to the Coronavirus, irrespective of if you are receiving money through a BBL, contact us on 0800 151 2602 or request a call back.