If your limited company cannot afford to repay its Coronavirus Business Interruption Loan Scheme (CBILS), you could:

• Speak to the lender about your options to repay.
• Contact a licensed insolvency practitioner for free, impartial advice.

In insolvency, a CBILS loan, up to the value of £250,000, is treated like any other unsecured debt and is not normally a personal liability to you, the director, as the debt belongs to the company. However, for loans over that amount, directors were required to sign personal guarantees as security.

What are the Coronavirus Business Interruption Loan Scheme (CBILS) repayment terms?

The CBILS loans were 80% backed by the government, which also committed to paying interest on the facility for the first 12 months, including any lender-levied charges. After the initial 12 months, lenders will inform companies of the interest and charges applicable.

The loans varied from lender to lender; however, the CBILS loans had some set terms including, but not limited to:

• Providing capital repayments on a regular basis, however, lenders may be able to provide capital repayment holidays subject to discussions.
• Businesses will only be subjected to early repayment charges should they choose to repay their financing before the end of the term.
• Businesses will be 100% responsible for paying the facility, and any interest and fees charged by the lender after the initial 12-month grace period.

Speak to your lender

By speaking with your lender, you can demonstrate a willingness to repay, and the lender may look at negotiating more affordable monthly repayment options or amending the loan’s current terms. Both will appeal more than your company defaulting on the current CBILS loan.

Can I be held personally liable for a CBILS Loan?

CBILS loans are classed as unsecured debts and usually don’t have personal guarantees against them and are not your personal liability, as the debts belong to the company. However, in specific cases, you could become personally liable for the loan.

• Certain CBILS lenders required personal guarantees to be signed.
  • For loans over £250,000, a director’s Principal Private Residence could not be used as security.
  • The lender can only recover 20% of the outstanding amount via a personal guarantee after the proceeds of the sale of business assets have been applied.

• Directors can become personally liable for a CBILS loan, if during an insolvency procedure they have used the loan for purposes unrelated to the economic benefit of the company.

Can a Coronavirus Business Interruption Loan be written off if my company can’t repay it?

A Coronavirus Business Interruption Loan is classed as an unsecured debt and cannot be written off if your company is still trading. If your company is insolvent and enters a formal liquidation procedure such as a Creditors’ Voluntary Liquidation (CVL) or administration, it can be written off as an unsecured debt as part of the process. You will still be held personally liable for any personal guarantees you may have signed, which will crystallise in liquidation.

Can I dissolve or strike off my company with an outstanding CBIL?

You can apply to have a company with an unpaid CBILS loan dissolved at Companies House. However, loan lenders and the Department for Business & Trade are likely to object to any form of dissolution.

How we can help your company if you cannot afford to repay its CBIL

If the repayments on the CBILS loan, or any other debts have become unmanageable, we can advise you on the most appropriate solutions available to your company. We are licensed to carry out the formal insolvency processes below, which can either help you repay your unsecured debts, or formally wind up and close your company.

• Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
  A company can repay a CBILS loan through a Company Voluntary Arrangement (CVA). An IP will consider all the company’s incomings and outgoings and consider how much the company can afford to repay on a monthly basis and propose the arrangement to creditors. All the company’s debts, including the CBILS loan will be included in a CVA. The formal repayment plan allows companies to continue trading whilst in the arrangement.
  Find out more about Company Voluntary Arrangements
• Restructure your company through administration
  Administration is an insolvency procedure for companies that are insolvent. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator, and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option, we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
  Find out more about administration

• Close your company down via a Creditors’ Voluntary Liquidation (CVL)
  If your company is insolvent and cannot cover the costs of its outgoing debts, you could enter your company into a Creditors’ Voluntary Liquidation. This is a formal insolvency process that can only be carried out by a licensed insolvency practitioner, like ourselves. The procedure will see your company formally wound up and its unsecured debts, including a CBIL, written off, allowing you, the director, to walk away.
  Find out more about Creditors’ Voluntary Liquidation
• Close your company down and start again via a pre-pack liquidation
  A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
  Find out more about pre-pack liquidation

In summary

A Coronavirus Business Interruption Loan is a debt belonging to the company and is classed as an unsecured debt. The loans were 80% backed by the government, which committed to paying the first 12 months of interest along with any lender-levied charges. For facilities above £250,000, some lenders required personal guarantees, however, this was limited to 20% of the facility and not against a director’s Principal Private Residence.

If your company cannot afford to repay a Coronavirus Business Interruption Loan, there are several options available to make payments easier:

• Speak to your lender about the loan’s repayment terms.
• Enter a formal repayment plan, a Company Voluntary Arrangement (CVA).
• Formally wind up and close the company through a Creditors’ Voluntary Liquidation, drawing a line under the debts.

Case Studies

M J Squire Limited

Kelly Burton • Construction & Engineering • Creditors' Voluntary Liquidation (CVL)

A bespoke joiners and shop fitters in Sheffield, M J Squire Limited, had been in its trade for more than 30 years.

However, recently it has been forced to close due to the downturn in the construction and retail industry.

The company was located at Orgreave Close in Sheffield, after working for many household names over the years including House of Fraser, Levi’s, Austin Reed and Tommy Hilfiger.

Until 2014, it had been a profitable company but over the past couple of years, it had been unable to secure profitable contracts.

February 10^th, 2016 saw the appointment of Wilson Field’s Andy Wood and Robert Dymond as liquidators. This development for the company came as a result of suffering cash flow problems.

Operations at M J Squire Limited have now ceased and regrettably, all nine roles within the company were made redundant.

Andy Wood, insolvency practitioner from Wilson Field, spoke about his work on this case. 

“Declining sales at M J Squires significantly impacted cash flow and the business’ ability to meet its liabilities. In the face of tough market conditions, the director has taken the difficult decision not to continue trading. The business has closed and the assets are being sold.”

“It is very sad to see this well-known local business cease to trade after over 30 years. The downturn in the retail sector has hit this business hard.”

Silcox Coach Company

Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)

Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.

Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.

Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.

However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.

Kelly Burton, director and insolvency practitioner at Wilson Field said:

“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.

“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”

As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and  a large bus and coach compound near the offices in Pembroke Dock.

Edwards Coaches is the largest family-owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.

It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.

Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.

Derwent Castings Limited

Kelly Burton • Metals • Creditors' Voluntary Liquidation (CVL)

Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher-than-expected dividend of 60p in the pound.

A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.

The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.

Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.

Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.

Andy Wood, associate director and insolvency practitioner at Wilson Field said:

“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.

“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.

“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”

Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.

However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.

In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.

Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.

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