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Many company directors are grappling with the dilemma of whether they can close their company if it has an outstanding Bounce Back Loan.

The short answer is yes, you can close your company through a Creditors Voluntary Liquidation. However, the process involves several considerations, particularly regarding the repayment of the loan and the potential liabilities involved.

In this article, we’ll cover closing a company with an unpaid Bounce Back Loan, director liabilities, the liquidation process, and the feasibility of striking off the company under these circumstances. 

Can I Liquidate My Company with a Bounce Back Loan

Can I Close My Company with an Unpaid Bounce Back Loan?

Closing a company with an unpaid Bounce Back Loan is possible, but it requires a methodical approach to make sure all legal and financial obligations are met.

The process typically involves a Creditors Voluntary Liquidation, where the company’s assets are sold to repay creditors, including the Bounce Back Loan.

However, it’s crucial to understand that closing the company doesn’t absolve the debt; rather, the repayment becomes part of the liquidation process. 

How to Close a Company with a Bounce Back Loan

Closing a company with a Bounce Back Loan typically involves the liquidation process, where the company’s assets are utilised to repay creditors: 

  • Seek Professional Advice: Engage with financial and legal advisors to understand the implications and the appropriate steps. 
  • Initiate Liquidation: A resolution to wind up the company must be passed, and a licensed insolvency practitioner should be appointed to oversee the liquidation. 
  • Asset Liquidation: The company’s assets are sold, and the proceeds are used to repay the Bounce Back Loan and other debts. 
  • Final Steps: After settling the debts, the company can be formally dissolved and no longer exists as an entity.  

Can Directors Be Held Liable for Bounce Back Loans During Liquidation?

Directors are generally not personally liable for the debts of a limited company, including Bounce Back Loans. This is provided they have stuck to their duties and not engaged in wrongful or fraudulent behaviour.

However, if directors have provided personal guarantees or if misconduct is identified, they could be held personally liable for the loan.

Ensuring transparency and compliance with legal obligations throughout the company’s operation and closure process is vital to mitigate personal risk. 

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Can I Strike Off My Company with a Bounce Back Loan?

Striking off, or voluntary dissolution is a simpler and less costly method of closing a company compared to liquidation.

However, striking off is generally not recommended or feasible for companies with outstanding debts, including Bounce Back Loans. 

  • Legal Obligations: To strike off a company, directors must ensure that the company has no outstanding debts or obligations. If a Bounce Back Loan is outstanding, creditors are likely to object to the strike-off. 
  • Creditor Notification: Before applying for strike-off, the company must inform all creditors, including the Bounce Back Loan provider, giving them the opportunity to object. 
  • Risks of Objection: If creditors believe the company is capable of repaying the debt or that strike-off is being used to avoid repayment, they can object, potentially leading to legal challenges or compulsory liquidation. 

What Are the Risks of Closing a Company with a Bounce Back Loan?

Closing a company with an outstanding Bounce Back Loan carries several risks, particularly for the directors: 

  • Personal Liability: If directors are found to have acted improperly or against the company’s best interests, they might face personal liability for the company’s debts. 
  • Legal and Financial Implications: Improper closure of a company with outstanding debts can lead to legal challenges, fines, and potential disqualification from serving as a director in the future. 
  • Credit Implications: The company’s inability to repay the loan could affect the credit ratings of the company and potentially the directors, depending on the circumstances of the loan repayment failure. 

Conclusion to Closing a Company with a Bounce Back Loan

In conclusion, while closing a company with a Bounce Back Loan is possible, it requires careful consideration of the legal and financial aspects involved.

Liquidation and striking off are two different paths, each with its own set of procedures and implications.

Directors must approach this decision with a thorough understanding of their responsibilities and the potential risks to ensure a compliant and orderly closure of their company. 

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    Andy Slinger

    Andy is Head of Marketing for Business Helpline with a wealth of experience Marketing in the financial sector. He has a passion for helping business owners struggling with debts.

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