Posted on: Sunday 6th December, 2020
The government’s Bounce Back Loan Scheme (BBLS) has been instrumental in helping businesses survive during the coronavirus pandemic, but as the crisis continues, some businesses are descending further into financial difficulty.
You don’t have to make any repayments on the loan for the first 12 months, which is welcome relief, but if you believe you won’t be able to repay your Bounce Back Loan at any stage, what should you do?
Do you go into liquidation and close down your business permanently, or are there other measures available to save the business?
When you enter liquidation any assets your company owns will be sold at auction, and the proceeds used to repay creditors. Your company is then removed from the register at Companies House, and ceases to exist.
Entering into liquidation voluntarily is better than waiting for a creditor to wind it up, as it means you can prioritise creditors, avoid trading wrongfully, and unwittingly taking actions that could be viewed as misconduct.
Your outstanding Bounce Back Loan would become an unsecured debt in the event of liquidation. These loans are backed 100% by the government and no personal guarantees are required.
If it couldn’t be repaid, the loan would be written off unless the liquidator discovered a breach of regulations/anomalies surrounding how it was used by directors or the company.
Depending on your circumstances, alternatives to entering liquidation when you can’t repay your Bounce Back Loan could include:
Voluntarily placing your company into liquidation can be a good idea in some circumstances – when there’s no chance of recovery or business rescue. It means you place your creditor interests first, which is an important part of your duties as a director.
A further benefit of huge importance to directors, is that by entering Creditors’ Voluntary Liquidation (CVL) you may be eligible to claim statutory redundancy pay. This could offset the costs of the liquidation process and support your personal finances at this crucial time.
If you believe your company is insolvent, you must seek advice from a licensed insolvency practitioner (IP). They’ll be able to assess your situation and present any different options to liquidation, such as alternative sources of finance or formally restructuring your company’s debts.
Redundancy Claims UK are insolvency specialists with an extensive track record of helping directors make successful claims for redundancy pay. We’ll advise on whether liquidation is the best option for your company, and if so, help you make a claim if you’re eligible. Please contact one of the team to arrange a free same-day consultation.
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If you are looking to close your limited company, you may have attempted to strike it off by submitting a DS01 form to Companies House. This process is also sometimes referred to as dissolving or company dissolution.
A Creditors’ Voluntary Liquidation (CVL) is an official procedure whereby a company’s assets are liquidated in order to pay creditors. It’s typically initiated by directors when their company becomes insolvent and there is no hope of business recovery.
Redundancy claims are a very professional company, Caroline who is dealing with our case is friendly, compassionate and very clear in explaining everything during this difficult time. The service we have received has been amazing, Thank you.Tina Hill Director of a professional services firm