No longer trading but have Bounce Back Loan only debt

[labelcode]

Hi,
My business stopped trading a few months ago and I have managed to clear down all my debts except around £5000 which remains to be paid on Bounce Back loan.
I have now way of paying this now. Does anyone know what my options are, I would like to close the business down.
Thanks,
Simon

 

[Scalloway]

Is it a limited company or are you a sole trader?

 

[labelcode]

Is it a limited company or are you a sole trader?

Thanks for reply - it's a limited company

 

[ChrisCallaghan]

Hi @labelcode ,

If £5,000 worth of BBL is literally the only debt left in your company's name, you may wish to consider following the below guide:

CLOSING A LIMITED COMPANY WTH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER

CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER If a company is unable to carry on trading due to becoming insolvent the standard procedure for closing it down is for the directors to appoint an Insolvency Practitioner to liquidate it...

www.ukbusinessforums.co.uk

Unfortunately the above method seems to be taking a couple of years to achieve, as BBL lenders are objecting to any strike off action for a protracted period of time.

Aside from the above, the other two options would be to keep your company open and use personal funds to keep up with the BBL repayments, and then close your company when the debt is settled. For the amount owed on your BBL, it would not be worth considering a Voluntary Liquidation - the professional fees would likely be about the same or higher than your BBL balance.

 

[ChrisCallaghan]

For others who may read this thread in the future....

When ceasing to trade a limited company, if the directors recognise there will be insufficient funds to settle all the liabilities, it would be a good idea to seek advice early (on this forum or from a licensed insolvency practice), if possible. Rather than paying off some debts with the company's remaining funds (which can risk a director being a accused of making preferential payments), it is often better to use any remaining funds to instruct an insolvency practitioner to close the company via a liquidation. One, it is much quicker than attempting to strike off and/or waiting for a creditor to wind up the company (which BBL lenders aren't doing). Two, it protects directors from any accusations of making preferential payments.

The above is a very broad summary, but true in many cases.

 

[IanSuth]

I may be picking up the wrong end of the stick - but from your posts in other threads re disqualifications for not correctly informing creditors before applying for strike off.

How does that interact with the Spongebob method and BBL debts ?

 

[DoolallyTap]

Everything you may need to know is all available by searching topics on the internet,

If you were trading knowing your were insolvent that is in breach of Insolvency Act 1986. If your limited company stopped trading why did you bother to clear down the debts.

So, What Will Happen To You If You Default On Your Bounce Back Loan​

Technically, there are no grave repercussions if you default on your bounce back loan. You won’t lose any assets, and it will not directly affect your credit score either. In the first place, credit checks are not mandatory for application to the loan scheme.

Read UK GOV

Closing a company: detailed information​

 

[IanSuth]

Everything you may need to know is all available by searching topics on the internet,

If you were trading knowing your were insolvent that is in breach of Insolvency Act 1986. If your limited company stopped trading why did you bother to clear down the debts.

So, What Will Happen To You If You Default On Your Bounce Back Loan​

Technically, there are no grave repercussions if you default on your bounce back loan. You won’t lose any assets, and it will not directly affect your credit score either. In the first place, credit checks are not mandatory for application to the loan scheme.

Read UK GOV

Closing a company: detailed information​

It was a specific qu to the IP's here who recently were posting here about specific interactions between timing of strike offs and BBL's

 

[ChrisCallaghan]

I may be picking up the wrong end of the stick - but from your posts in other threads re disqualifications for not correctly informing creditors before applying for strike off.

How does that interact with the Spongebob method and BBL debts ?

Very good question. Spongebob's guide leans more in the direction of encouraging directors to wait for Companies House to start the dissolution process for non-filing, and includes voluntarily applying for strike off through a DS01 as optional. If CH trigger a compulsory dissolution, there is no requirement for directors to communicate with creditors.

Thankfully Spongebob's guide does cover the issue of ceasing to trade for the required 3 months and writing to creditors if directors choose to apply for strike off:

Three months after ceasing trading you can apply to Companies House to have the company struck off the register using form DS01 which can be downloaded from their website. Copies of the application should be sent to all creditors, who will be given the opportunity to object to the striking-off. Generally HMRC will object if they are aware of any monies outstanding, but most other creditors will not bother unless they have a particular axe to grind.

Unfortunately, as we know, the last part is slightly out-of-date. BBL lenders will always object, typically for around two years, but I know some directors who have been waiting even longer.

 

[ChrisCallaghan]

added to above:

Spongebob's guide also does not include any mention of the Insolvency Services newer powers of investigation regarding the conduct of directors of dissolved companies. This is mainly being used to investigate BBL misuse or fraud.

 

[IanSuth]

Thank you

I just thought as you had mentioned "For others who may read this thread in the future...."

It was a good place to ask that, as it was puzzling me

 

[labelcode]

Thanks for all your replies. I think the SpongeBob plan looks like it could be worth a try. There is one complicating factor though. I have the BBL with same bank that I have business account which has an overdraft facility and the only payments coming out (making me go more overdrawn) are the BBL payments. Would my best bet be to clear overdraft (£100 or so), request removal of overdraft, then write to bank as per spongebob, then stop payments to BBL, then fill in companies house form to strike off, then wait to see what happens?!?

 

[ChrisCallaghan]

Would my best bet be to clear overdraft (£100 or so), request removal of overdraft, then write to bank as per spongebob, then stop payments to BBL, then fill in companies house form to strike off,

All sounds sensible, so long as you are beyond 3 months of ceasing to trade.

then wait to see what happens?!?

Unfortunately we know what is likely to happen. The BBL lender will lodge an objection, and your application to strike will be suspended (not cancelled). When this happens, you do not need to reapply to strike off. It's then just a case of waiting for the bank to cease objecting, which could take a couple of years. You'll continue to get the odd phone call and letter from the bank and any collection agent they may instruct, but no worse than that.

 

[labelcode]

All sounds sensible, so long as you are beyond 3 months of ceasing to trade.



Unfortunately we know what is likely to happen. The BBL lender will lodge an objection, and your application to strike will be suspended (not cancelled). When this happens, you do not need to reapply to strike off. It's then just a case of waiting for the bank to cease objecting, which could take a couple of years. You'll continue to get the odd phone call and letter from the bank and any collection agent they may instruct, but no worse than that.

Okay thanks Chris, much appreciated,

 

[ChrisCallaghan]

Okay thanks Chris, much appreciated,

Good luck with everything! We'd all be grateful if you get the chance to update us on how you get on.

 

[DS01BUSINESS]

Hi labelcode,

Bearing in mind you posted this 18 months I would be very interested to hear how this has played out, as I am in a similar position. Grateful for any update

 

[MikeJ]

Last seen May 16, 2023, so don't hold your breath.

However, he may be getting alerts on this thread.