What Happens to a Bounce Back Loan If a Company Is Dissolved?
A Bounce Back Loan doesn’t simply disappear because a company has closed. If your company still owes money on a Bounce Back Loan, dissolving it isn’t as simple as filing the paperwork. Closing it without dealing with the debt first can create bigger problems than the ones you wanted to leave behind. This article explains what happens, why strike-off applications with an outstanding loan usually run into trouble, and what the correct route looks like instead.
Voluntary strike-off (also called dissolution) Â is for solvent companies, meaning companies that can pay their debts and have stopped trading. A company that still owes money on a Bounce Back Loan doesn’t meet those rules, so strike-off isn’t the right route. You can still submit the application, but it’s likely to run into trouble.
If you apply to strike off a company with an unpaid Bounce Back Loan, the lender (or another creditor, such as HMRC) will very likely object. A creditor is anyone your company owes money to. The creditor sends its objection to Companies House. If Companies House accepts it, it can’t strike the company off for six months, and the company stays on the register during that time. The creditor can ask for more time if it shows it’s trying to recover the debt, so the delay can last longer.
If a company can’t pay its debts, including a Bounce Back Loan, the proper way to close it is through a formal insolvency process.Â
The most common one is a Creditors’ Voluntary Liquidation (CVL). The company appoints a licensed insolvency practitioner. This is a regulated professional who closes down companies that can’t pay their debts. They deal with the company’s assets and pay creditors as much as they can. Once the company goes through a proper process like this, the lender can usually claim the unpaid balance from the government under the Bounce Back Loan Scheme guarantee, instead of chasing you personally.
Even if a strike-off application succeeds, for example because nobody objects in time, that isn’t necessarily the end of it. Creditors, including a Bounce Back Loan lender, can apply to put a dissolved company back on the Companies House register for years afterwards. If that happens, the creditor brings the company back so it can pursue the debt through the process you skipped the first time.
In most cases, a Bounce Back Loan is a debt of the company, not yours personally. The scheme didn’t generally ask for a personal guarantee, which is a promise to repay from your own money.
However, you may have to repay the loan yourself if there’s evidence you used it wrongly, for example by spending it on personal costs instead of business costs, or by giving false information on the application.
Since December 2021, the Insolvency Service has had more powers to look into how directors of dissolved companies used their Bounce Back Loans. This includes companies that closed without going through a formal insolvency process. Several directors have already received bans of 7 to 12 years from acting as a company director after dissolving companies to avoid repaying their loans. In serious cases, they can also face orders to pay compensation. This action targets directors who used the loan wrongly or gave false information, not those who used it properly and are struggling to repay it.
If your company has an unpaid Bounce Back Loan and you’re thinking about closing it, get advice before you apply for strike-off. Advice helps you understand your options, including whether a CVL, a repayment plan or another route fits your situation. It also helps you avoid the delays, objections and possible investigation that come with closing a company the wrong way. You can request a free consultation with Acme Credit to talk through your options.
If you’re dealing with a Bounce Back Loan after a director or shareholder has passed away, rather than closing the company, see our guide: Is a Bounce Back Loan Repayable If a Director or Shareholder Dies?
You can submit an application, but voluntary strike-off is only for companies with no unpaid debts. If you still owe a Bounce Back Loan, the lender will very likely object, and that delays the application.
If Companies House accepts the objection, it puts the strike-off on hold for six months. The company stays on the register and you still owe the loan. The creditor can ask for more time if it shows it’s trying to recover the debt.
Generally not, because most Bounce Back Loans didn’t require a personal guarantee. You may have to repay the loan yourself, and you could be banned from being a director, if there’s evidence you used it wrongly or gave inaccurate information on the application.