Bounce back loan for Ltd Co

[Pet Nanny]

We had a small bounce back loan for our limited co to try & stay afloat during Covid, but sadly we lost our business at the back end of last year.

I applied for a strike off at companies house but Barclays keep objecting stating that we need to start paying this loan back.

I explained that we were a limited company but all they do is pass me from department to department and after an hours wait yesterday I hung up.

Has anyone had a similar problem? I thought as we were a limited company we as individuals, would not be liable! Any help gratefully received.

 

[JEREMY HAWKE]

I think that is a common issue and has been mentioned on here a couple of times .
It looks like the banks have to go through their normal litigation process to get their money back from the government

 

[japancool]

I thought as we were a limited company we as individuals, would not be liable! Any help gratefully received.

What did you use the loan for?

 

[Mark T Jones]

It might be best to post this in insolvency for the likes of @Lisa Thomas to comment.

however, broadly

On the BBL there are no personal guarantees, so you personally aren't liable (caveats apply)

Whilst the business still exists, the bank are bound to make best efforts to collect from that company, which is why they have objected to strike off and are continuing to chase.

An insolvency type Peron can advise on how best to close the business, at which point the bank will stop chasing

 

[Chris Parkman]

This is a common issue and you may need to look to place the company into creditors voluntary liquidation.

 

[Gavin Bates]

Hi

As Chris has mentioned this will be a common problem. The Government has instructed the Banks to object to a company strike off where there is an outstanding BBL.

I also understand that the Banks will pursue the outstanding BBL's just like any other debt. However, as you have mentioned and you are correct this is a Company debt and you are not liable for it.

It is not yet clear what steps the banks have to take to prove that a debt is uncollectable.

I hope this helps you understand the position better.

Kind regards

Gavin

 

[Lisa Thomas]

Eventually, either a creditor will liquidate the company (and the liquidator will investigate to ensure the BBL monies were used as intended) or Companies House will strike the company off for non filing of returns, or your DS01 will slip through the net.

The alternative is for the directors and shareholders to place the company into liquidation.

 

[Spongebob]

Hi

As Chris has mentioned this will be a common problem. The Government has instructed the Banks to object to a company strike off where there is an outstanding BBL.

I also understand that the Banks will pursue the outstanding BBL's just like any other debt. However, as you have mentioned and you are correct this is a Company debt and you are not liable for it.

It is not yet clear what steps the banks have to take to prove that a debt is uncollectable.

I hope this helps you understand the position better.

Kind regards

Gavin

In order for banks to claim their money back from the government, my understanding is that the company must go through a formal insolvency procedure.

Dissolution by Companies House is not such a procedure, which is why banks are routinely objecting to strike off applications where there is a BBL in place.

What remains to be seen is whether or not banks will be forced to wind up debtor companies resulting in the Official Receiver being appointed as liquidator. Given the potential numbers of such companies involved the logjam in the Insolvency Service could be phenomenal.

My advice to anyone finding themselves with an insolvent company owing a BBL would be the same advice as usual. Write to the bank (and any other creditors) explaining that the company is insolvent, has ceased trading, and has insufficient assets with which to appoint an Insolvency Practitioner. Invite the bank to wind the company up resulting in a compulsory liquidation by the Official Receiver.

My suspicion is that little will happen for a long time while the banks and the government argue over the way forward.

 

[Newchodge]

In order for banks to claim their money back from the government, my understanding is that the company must go through a formal insolvency procedure.

I wonder if that was written into the government's formal guarantee to the banks? And, if it wasn't, whether the banks will fight the government. I cannot imagine that the banks would have lent in the way that they did if they had known this. Also, do you know what the position would be for sole traders - would they have to be forced into personal bankruptcy?

 

[Mark T Jones]

I wonder if that was written into the government's formal guarantee to the banks? And, if it wasn't, whether the banks will fight the government. I cannot imagine that the banks would have lent in the way that they did if they had known this. Also, do you know what the position would be for sole traders - would they have to be forced into personal bankruptcy?

As a jaded old finance hack, the first thing that springs to my mind when I hear "guarantee ' is 'what are they terms?'

In this case, there was undoubtedly persuasion, coercion and probably some strategic vaguery..

You may not recall, but in version 1 of CBILS, Rishi uttered the immortal, clueless line 'we helped the banks out, now they must help us out" - whilst expecting the banks to bear 25% of the risk clearly the banks said no, so BBL was devised in a hurry (literally over a weekend)
.it was, of course heavily flawed, but the speed and efficiency of delivery was phenomenal.

Some banks, not under the government thumb declined to take part.

But there is no point pulling it apart - it's not intended to ever be repeated, so there are no lessons to learn

 

[Spongebob]

I wonder if that was written into the government's formal guarantee to the banks? And, if it wasn't, whether the banks will fight the government. I cannot imagine that the banks would have lent in the way that they did if they had known this. Also, do you know what the position would be for sole traders - would they have to be forced into personal bankruptcy?

Good points, and no-one knows the answers.

The prospect of the banks having to initiate tens of thousands of winding up petitions and bankruptcy orders will doubtless concentrate minds.

The existing systems will collapse under the unprecedented extra pressure.

 

[Pet Nanny]

Recent news is that our bank has passed us to their debt recovery (collections team). Lady l spoke to could not understand how this can happen as we are a limited company! Unsure what l can do now, but it’s a worry we could really do without. Hubby has MS & l have explained our health situation, but they are not budging ?

 

[Mark T Jones]

Recent news is that our bank has passed us to their debt recovery (collections team). Lady l spoke to could not understand how this can happen as we are a limited company! Unsure what l can do now, but it’s a worry we could really do without. Hubby has MS & l have explained our health situation, but they are not budging ?

Presumably they are chasing the company, not you?

in which case they will continue to do so until you can prove that the company is insolvent

 

[OldWelshGuy]

Contact the bank and tell them the company is no longer trading (as per Spongebob) but importantly tell them to remove your telephone number and deal with things 100% in writing only.

 

[Lisa Thomas]

It's standard practice for the debt to be passed to collections so they can decide on next steps on how to try and recover the debt from the company.

 

[UKSBD]

Recent news is that our bank has passed us to their debt recovery (collections team). Lady l spoke to could not understand how this can happen as we are a limited company! Unsure what l can do now, but it’s a worry we could really do without. Hubby has MS & l have explained our health situation, but they are not budging ?

What is your website and the content of your website worth?
Would selling that clear the BBL?

 

[UK Contractor Accountant]

The process for recovering overdue loans in the Bounce Back Loan Scheme as agreed between the government and lenders in December 2020.

"Enforcement action includes petitioning the borrower for insolvency or starting administration
proceedings.

Enforcement is not expected unless in the event of serious or organised fraud, or borrower refusing to pay but has assets.

Use their discretion to take enforcement action in extenuating circumstances."

 

[Spongebob]

The process for recovering overdue loans in the Bounce Back Loan Scheme as agreed between the government and lenders in December 2020.

"Enforcement action includes petitioning the borrower for insolvency or starting administration
proceedings.

Enforcement is not expected unless in the event of serious or organised fraud, or borrower refusing to pay but has assets.

Use their discretion to take enforcement action in extenuating circumstances."

What is the source of this?

If true, it’s a game changer for companies which have failed despite receiving a bounce back loan.

If a bank is able to claim on the government guarantee without forcing the company into liquidation via a winding up order it opens the door to the simple dissolution of insolvent companies which have few assets.

The bank’s incentive is to get their money back in the easiest and cheapest way. A fraud investigation or even a liquidation is not in their best interests if they can make a claim without the hassle.

It is also potentially great news for sole traders or partnerships with outstanding bounce back loans which they are unable to repay. Bankruptcy could well be avoided after all.

 

[UK Contractor Accountant]

The Bounce Back Loan Scheme: an update - NAO report

This report provides an update on the Bounce Back Loan Scheme.

www.nao.org.uk

 

[jimbof]

Lots of juicy bits in that report, like the highest incident of fraud being mis-statement of turnover, mis-statement of <25% is considered minor and not going to be looked into (implying mis-statement >25% maybe is), details of an HMRC trial using tax data to uncover some of the scale of mis-statement, info about the automated process which is being used to prevent dissolution to allow banks to chase the BBL holders, etc. Banks apparently will be audited to show they have made sufficient checks before claiming on the guarantee, or they can face clawback of guarantee payments, etc. Well worth a read.

 

[japancool]

It is also potentially great news for sole traders or partnerships with outstanding bounce back loans which they are unable to repay. Bankruptcy could well be avoided after all.

Presumably unless the borrower has assets such as a house and refuses to pay.

 

[UK Contractor Accountant]

Presumably unless the borrower has assets such as a house and refuses to pay.

I assume thats if the BBL has been abused!