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Can I liquidate my company if I have a Bounce Back Loan?
The simple answer is yes.
If you believe that your company may be insolvent, you will need to consider placing it into voluntary liquidation. The two main tests for insolvency are if the company is unable to pay its debts as when they fall due (called the cash flow test) or the balance sheet test i.e., if its liabilities exceed its assets.
If the company cannot be rescued, the formal liquidation route ensures the business is closed in an orderly manner and that creditors, employees, and customers are treated appropriately.
As part of the liquidation process, all assets of the company will be identified and sold, with the proceeds going towards repaying creditors as much as possible. Any remaining debts after the liquidation is finalised are written off – including Bounce Back Loans.
As Bounce Back Loans are guaranteed by the Government, directors did not need to provide a personal guarantee. Therefore, if your company is unable to repay due to liquidation, the Government will repay any remaining outstanding monies to your bank, following liquidation, rather than the company directors.
Is Strike off an option if I cannot repay my Bounce Back Loan?
When a company is no longer required the cheapest and quickest way is to use the informal strike off route. This involves making a request to Companies House to have the name removed from their register. If no objections are received it will bring an end to the limited company.
However, strike off is intended for solvent companies and as such it is not suitable if you have an outstanding Bounce Back Loan.
The Government are naturally keen to claw back as much as possible especially as they have provided security to the banks in the event of company’s being unable to repay their loans and as such has requested the banks object to any company (with an outstanding Bounce Back Loan) attempting to have their company struck off using the informal route.
In the circumstances, if you have an outstanding Bounce Back Loan which you cannot repay, strike off is not an option and to close the company you will need to use the formal liquidation process.
If you have concerns about repaying your bounce back loan and believe your company may be insolvent, you should consult with a firm of licensed insolvency practitioners such as ourselves. We can go through the various options available to you and if liquidation is right for you can deal with the process – including liaising with your bank regarding your outstanding bounce back loan.
