As a director, you have misused your Bounce Back Loan (BBL) if the loan has been used for reasons not deemed to be for the company’s economic benefit.

If you’re concerned about your BBL or your company’s financial position, as licensed insolvency practitioners, we can offer free, impartial, confidential advice with no obligation.

What could a Bounce Back Loan be used for?

The Bounce Back Loan Scheme was designed to help companies struggling during the COVID-19 pandemic, paying working costs and making up for reduced takings. Its ease of access allowed companies to quickly borrow up to £50,000, with the loans being 100% government-backed. However, the easy application process meant it was open to abuse.

You could use a BBL for the following purposes:

• Support the everyday running of the company
  The Bounce Back Loan Scheme was initially intended to pay staff, running costs, suppliers, repay loans, support your directorial income, and maintain your company’s cash flow.
• Investment to enhance the company
  Outside of everyday costs, you could have used a BBL to invest in your company. This could include marketing costs or purchasing new machinery and equipment.

What is deemed Bounce Back Loan misuse?

BBLs were intended for your company’s economic benefit rather than your own personal use. The following could be considered Bounce Back Loan misuse:

• Fraudulent Application
  If you provided false information when applying for the loan, this could be considered fraud. False information could include:
  • Falsifying business turnover
  • Using non-existent businesses
  • Multiple loan applications
  • Impersonating existing businesses
• Dividends
  The Bounce Back Loan could not be used as a dividend. These must be paid from profits, which the loan isn’t. You could still draw dividends; however, they should not have been paid if your company was not profitable.
• Increase salary
  A Bounce Back Loan could be used to cover salaries, but you should not have used it to increase salaries without justification, especially if the company was in a difficult financial position.
• Director’s Loan Account (DLA)
  The Bounce Back Loan could be lent to you as a director. However, this needs to be paid within nine months. If the company becomes insolvent in that time, you can be held personally liable if it’s within an overdrawn Director’s Loan Account.
• Personal expenditure
  The loans should not have been used for buying luxury goods or holidays, paying deposits on personal property or non-business assets.
• Non-business-related investments
  Bounce Back Loans should not have been used for non-business-related investments.
• Preference payments
  If your company is insolvent, it should not make any preference payments. Just as with any other preference payment, if a Bounce Back Loan is used to prioritise one creditor over another, you can become personally liable.

What are the consequences of misusing your company’s Bounce Back Loan?

If you’re found to have misused your company’s BBL, you could face the following consequences:

• Criminal prosecution
  Under the Fraud Act 2006, you could be criminally prosecuted, which can lead to fines or imprisonment.
• Personal liability for funds and compensation of assets
  You could be held personally liable for the misuse of your BBL funds, including compensation for assets bought with those funds. You may be required to repay it out of your personal finances.
• Director disqualification
  You could face a ban on holding a directorship for your current company, another one in the future, or directly or indirectly take part in the formation of a new company.

What can I do if I’ve Misused My Company Bounce Back Loan (BBL)?

By speaking to us early, you can help mitigate these risks, and we can provide free, impartial and confidential advice with no obligation, giving you a better idea of how to proceed.

We can advise you on your company’s position, the effects of the BBL, how it will be treated in insolvency and help you understand any personal implications.

How our services can help your company

If your company is experiencing financial difficulties, speak to us for free, impartial and confidential advice with no obligation. We can assess your situation and carry out the following formal insolvency procedures to help you and your company, including recovery, restructuring, and liquidation.

• Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)

  A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.

  More on Company Voluntary Arrangements

• Restructure your company through administration

  Administration is an insolvency procedure for companies. 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.

  More on administration

• Close your company down via a Creditors Voluntary Liquidation (CVL)

  A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.

  More on 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.

  More on pre-pack liquidation

How to get in touch with us: The next steps

If you’re concerned about how you used your BBL, you’re struggling to cover its repayments, or your company is experiencing any other financial difficulties, speak to us. Our initial advice team can provide you with free, impartial, confidential advice with no obligation.

1. Speak with our initial advisers
   Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation.
2. Initial assessment
   During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems.
3. Formally engage with Wilson Field
   If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.

In summary

Bounce Back Loans were intended to economically benefit struggling companies. If misused, a BBL can lead to directors being held personally liable for the outstanding amount. If your company is struggling to repay its BBL, or you’re worried you might have misused its funds, contact us in the strictest confidence, and our initial advisers will guide you through your options.

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