Should I Personally Repay A Bounce Back Loan Or Go Into Liquidation?

The decision is yours of course if you personally repay a bounce back loan or instead go into liquidation if the company is unable to repay it. It may well not be the only option for the company, however. 

Whichever route you go down will depend on your and your company’s circumstances.

The company that took out the bounce back loan remains liable and if it can will need to repay it. 

The decision could be an issue if you have a simple company with few creditors besides the bounce back loan with no material assets and insufficient trading income to make the bounce back loan repayments, which could mean further trading risks turning into Wrongful Trading.

If you are contemplating paying off the bounce back loan personally then you should note you are not personally liable contractually to repay it; it is a liability of the company, not a company director. 

If a bounce back loan has been validly applied for and properly deployed for the economic benefit of the company then if say more than £5,000 (an an example only) is outstanding on the loan it may be cheaper for a director personally to put a company into voluntary liquidation rather than repay the bounce back loan if the company has no reasonable prospect of being able to repay the loan.

This is a commercial consideration to consider if the company is insolvent and even if it is, there may be other options available to the company instead of liquidation and or the director making the payments personally.

Once you go into liquidation repayment of the bounce back loan would be a matter locked in the liquidation. If the company has no assets or property then the bounce back loan would not be paid. The lender would have to make a call under the government guarantee. 

Whilst the Insolvency Service now has the power to investigate dissolved companies and thereby is no longer limited to companies that have gone into a formal insolvency procedure, it is to be expected that more of its investigations will arise from liquidations as opposed to companies that were dissolved in the first instance.

Although there appears to be little data on this over a prolonged period because the law was changed relatively recently it is likely for the time being at least that going into liquidation is more likely to put a director at risk of investigation than a company that is simply dissolved.

Obviously, however, it will depend on the facts of the case and independent professional advice should be sought to assist with your decision making.