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Can I liquidate my company with a bounce back loan?

If you have received funds from the scheme, your company can still undergo an insolvency procedure such as a Creditors Voluntary Liquidation (CVL), that would see the company liquidated.

Your unpaid Bounce Back Loan becomes an unsecured debt, which can be included in an insolvency procedure. Similarly, if your company was liquidated, an unpaid Bounce Back Loan would only be repaid after the company’s secured and preferential creditors. However, if the debt relating to a Bounce Back Loan remains at the end of the insolvency arrangement, that debt is written off.

What happens to the bounce back loan if the company goes into liquidation?

Banks are often considered secured creditors, with the owed debts fixed over company assets. However, this is not the case with a Bounce Back Loan, as it is 100% backed by the government, during a liquidation any of the debt that is not repaid, will be covered by the government.

Once the liquidation is complete, the bounce back loan is written off as the company closes its doors, with all the debts the company has dying with the company.

Can I be held personally liable for the bounce back loan?

As the bounce back loans are 100% backed by the government, directors will not have needed to sign personal guarantees. A limited company is classed as its own legal entity, so a director is protected with limited liability, meaning their own finances are separate to that of the limited company. As no personal guarantees have been signed for a bounce back loan, it means that during a liquidation procedure, directors cannot be held personally liable for repaying the loan.

Misusing a bounce back loan?

In normal circumstances, directors face no risk of personal liability for the amount borrowed through the BBLS. However, if a bounce back loan has been misused a director can be held personally liable. If you have any concerns about the misuse of a bounce back loan, please contact us for advice. 

See what constitutes the misuse of a bounce back loan

How we can help

If you are struggling with company debts, such as a bounce back loan, speak to us and we can give free, confidential advice. Through the process of a liquidation, you can see your company debts written off as the company closes, giving you the chance to start over again as a director. Our licensed insolvency practitioners have years of experience in business recovery and closure. You can speak to us today with no obligation and see how we can help you.

How to put a company into liquidation

If you are considering the liquidation of your company, we are licensed insolvency practitioners and are able to assess your situation and put your company into liquidation – this is known as a Creditors Voluntary Liquidation (CVL).

  1. Speak with our initial advisers through phone or online chat.
  2. After initial assessment we will identify if your company is viable for liquidation.
  3. We will propose to you the liquidation of your company and undertake the necessary steps.

All advice is free of charge and if a liquidation is viable it will result in the formal closure of your company, and any unsecured debts will be written off.

Find out more about how CVLs work here

In summary

An unpaid bounce back loan is a debt of the limited company. A company that has a bounce back loan can still be liquidated. With no personal guarantees signed, a director can only be held personally liable for a bounce back loan, if they have misused their BBL. By going through the process of a liquidation, the bounce back loan, along with any other debt the company as will die when the company closes its doors.

Beverley Horton

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