Many company directors might be considering dissolving their companies and are curious whether they can do so with a Bounce Back Loan.
This article will explore this topic in detail, providing information on the safest way to dissolve a limited company with a BBL, the consequences of dissolution, and the possibility of reinstatement by HMRC.
Can I Dissolve a Limited Company with a Bounce Back Loan?
Currently, a company with a Bounce Back Loan can apply to dissolve the company but will receive an objection to this, either from the lender or the government.
While it’s possible to dissolve a company with a Bounce Back Loan, it’s important to be aware of the implications.
The BBL is a debt, and if you dissolve your company without repaying the loan, the company’s assets will be used to settle outstanding debts.
It’s essential to ensure that the company’s liabilities, including the BBL, are addressed before dissolution.
If the company has no assets or insufficient assets to cover the loan, the remaining debt will be written off unless there is evidence of fraud or misconduct.
(Check out this link if you are interested in our UK limited company dissolution service).
What is the Safest Way to Dissolve a Limited Company with a BBL?
The safest way to dissolve a limited company with a Bounce Back Loan is to repay the loan in full before starting the dissolution process.
If this isn’t possible, you can consider alternative methods, such as a Company Voluntary Arrangement (CVA) or a formal insolvency procedure like liquidation.
A licensed insolvency practitioner can guide you through these processes, ensuring that your company’s affairs are properly managed, and your legal obligations are met.
NOTE – You might find this post useful it talks about closing a limited company with debts.
What Happens When You Dissolve Your Limited Company with a Bounce Back Loan?
When you dissolve a limited company with a Bounce Back Loan, the company is struck off the Companies House register and ceases to exist.
The company’s assets are used to settle outstanding debts, including the BBL.
If the company has insufficient assets to cover the loan, the remaining debt will be written off.
However, it’s crucial to note that if there is evidence of fraud, misconduct, or wrongful trading, the company directors could be held personally liable for the outstanding debt.
NOTE – This post about director’s loans might also be useful for you to read.
Can HMRC Reinstate Your Dissolved Company?
If your dissolved limited company had unpaid tax liabilities or undeclared assets, HMRC can apply to reinstate the company.
This can occur if HMRC believes there is a risk of a significant loss to the Crown, and they may investigate the company and its directors further.
If the company is reinstated, it will be required to address outstanding debts, including the Bounce Back Loan.
NOTE – You may also find our post useful, talking about how to close a company in the United Kingdom.
Final Notes On Your Limited Company Dissolution and Bounce Back Loans
Dissolving a limited company with a Bounce Back Loan can be a complex process, and it’s essential to carefully consider your options and obligations.
Seeking advice from a licensed insolvency practitioner or a legal professional is recommended to ensure you make the best decision for your company and avoid potential pitfalls.
Remember that acting ethically and transparently throughout the process is crucial to protect your interests and your company’s reputation.