A BBL or Bounce Back Loan in liquidation is classified as an unsecured debt. Unsecured debts are paid off last in liquidation through the sale of company assets. If any unsecured debts remain after the liquidation process, they are written off as the company is formally wound up.

Closing a company with a Bounce Back Loan

If your company is insolvent and cannot pay its liabilities as and when they fall due, liquidation is one of its options if it has an unpaid Bounce Back Loan.

• Closing through liquidation
  When a company’s debt is so severe that recovery isn’t possible, the directors might be better off closing and walking away. A Creditors Voluntary Liquidation (CVL) closes the insolvent company and writes off its unsecured debts. A Bounce Back Loan in liquidation is treated the same as any other unsecured debt.
  More on Creditors Voluntary Liquidation

Am I personally liable for an unpaid Bounce Back Loan in liquidation?

Directors will not be personally liable for an unpaid Bounce Back Loan in liquidation, as lenders did not require a personal guarantee to secure the loan.

A liquidator will investigate the company’s financial history before and during the insolvency. A director who misuses a BBL could be held personally liable.

What is Bounce Back Loan Misuse?

The Bounce Back Loan was introduced to support businesses and help them stay open, with the loan intended to provide an economic benefit. Common scenarios for misuse are, but not limited to:

• Dividends
  Bounce Back Loans should not have been used to pay dividends, as these are paid from profits, which the loan wasn’t.
• Increase salary
  The loan could have been used to cover your own salary, but it should not have been a reason to increase it.
• Director’s Loan Account
  It was possible to temporarily use the BBL as a loan to the director. However, it needed to be paid back within nine months. If the company becomes insolvent after that, directors can be held personally liable for the overdrawn Directors Loan Account.
• Breaking the loan agreement
  If a director used a BBL to fund a personal lifestyle or pay off personal debts such as a mortgage, they can be held personally liable for the loan.

Can I dissolve a company with an unpaid Bounce Back Loan?

Directors can apply to dissolve a company with an unpaid Bounce Back Loan. However, as a BBL is an unsecured debt, creditors will likely object to the dissolution, and the Insolvency Service can investigate directors of dissolved companies. To close a company with an outstanding Bounce Back Loan, it should enter a CVL.

How we can help

If your business is struggling with debts such as a Bounce Back Loan, speak to us. Our team of initial advisers can assess your situation and offer free, confidential advice. Speak to us today and see how we can help you.

1. Speak with our initial advisers through phone or online chat.
2. After an initial assessment, we will identify what options could be available to your company, which may include a CVL.
3. We will propose to you the best solutions available to your company considering all its circumstances, including an unpaid BBL and undertake the necessary steps to help, with a no-obligation consultation.

Depending on your company’s situation, you might have other options outside of closure through liquidation. If the company would be viable were it not for its unsecured debts, which could include a BBL, your company could pay back what it can afford through a Company Voluntary Arrangement (CVA). Alternatively, restructuring the company via administration could be a viable option.

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

In summary

A Bounce Back Loan in liquidation is classed the same as any other unsecured debt. The Bounce Back Loan is paid after secured and preferential creditors. As no personal guarantees were signed in securing a Bounce Back Loan, directors won’t be held personally liable unless the loan has been misused.

The Bounce Back Loans were 100% backed by the government, so lenders will look to them for repayment once the process has concluded if the company has an unpaid Bounce Back Loan in liquidation.

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