Did your Bounce Back Loans fall flat and if so what are your options? If it did not give you the lift you needed and has now gone what are your options?
If your company has not recovered from the effects of the Pandemic and you cannot repay the Bounce Back Loan you do have a number of options that you could consider. You can:
- Do nothing so long as you are not continuing to trade whilst insolvent and causing further losses to be incurred.
- Liquidate the Company.
- Rescue the Company.
Do Nothing And Cease Trading
The reason that doing nothing is not often a great option for many people is that if you cease trading you have all the responsibility of a company but none of the rewards.
You will still potentially have to pay an accountant to do:
- annual accounts
- corporation tax returns
In addition, there could still be further day-to-day administration with former trading accounts that need to be dealt with which might not be a productive use of your time to close down. Or you might continue to receive correspondence from the Bank that lent you the Bounce Back Loan.
Liquidate The Company
You can Liquidate a Company with a Bounce Back Loan.
The loan is a creditor of the Company not you personally as a Director. As a result, you will not be personally liable for the Bounce Back Loan. It was a condition when you applied for the Bounce Back Loan that you would not be required to provide a personal guarantee.
This can be the responsible course of action for a Director to take.
The Bounce Back Loan will be dealt with by the Liquidator of the Company who is the Insolvency Practitioner responsible for closing down the company once it has gone into Liquidation.
The effect of this will mean:
- that the bank that lent the Company the Bounce Back Loan will seek its repayment in most cases from the government
- the company will be handed over to the Liquidator
- you will no longer be responsible for the company and its administration when it is in Liquidation
- you will no longer have the burden of paying for and preparing annual accounts and company tax returns
Rescue The Company
Whilst you may still be fighting to recover the business lost during the Pandemic, you might have started to turn the corner but still be experiencing cashflow difficulties.
You may consider you are able to save the company if you simply had a breathing space. An Administration might be a good option for you as the Moratorium might be what you need to get to a point to enable you to take advantage of any improved trading that you are now experiencing.
Alternatively, or additionally, you may be able to reorganise payments terms with your creditors through what is known as a Company Voluntary Arrangement (“CVA”) whereby you repay ALL of your creditors over a period of time such as five years.
