What if a limited company doesn't survive pandemic even with BBL

khanji17

Hi,

I am wondering what happens, if the bounce back loan is not enough for a small limited company to survive the pandemic and it goes out of business. What will happen to the loan and the liability with the director?

calcotti

I thought the point of the BBL was that banks cannot take any action to recover against the personal assets of the borrower. In the case of a business failure the government guarantee kicks in and the tax payer picks up the liability.

kaMelo

That's exactly how I understood the bounce back loans, 100% taxpayer backed if the company fails.

That was one of the problems with the business interruption loans, whilst 80% backed by the taxpayer there were reports of banks requiring personal guarantees from directors for the 20%. Not against the rules but definitely against the spirit of them.

(Now where have I heard that recently)

Jeremy535897

From FAQs:

"What happens if I find I’m struggling to repay the loan?

You should talk to the lender if you are experiencing financial difficulties and they will have standard processes in place to support customers in those circumstances.

Lenders are not permitted to require personal guarantees for the Bounce Back Loan Scheme.

For sole traders or small partnerships, who often risk their personal assets when borrowing, the terms of the Bounce Back Loan Scheme means no recovery action can be taken over a principal private residence or a primary personal vehicle."

dunstonh

The Government has indicated it will soften the wrongful trading rules.   However, if you company was already on the rocks before CV and you expect it to fail, then you should not be taking a BBL.  In that scenario, they could come after your personal assets.

In the case of a business failure the government guarantee kicks in and the tax payer picks up the liability.

The administrator would still be looking at the business to see what can be recovered.   If there is no wrongful trading (under the revised criteria) then there is nothing to fear.

khanji17

Thanks everyone, I hope it doesn't come to that, but just when taking out the responsibility of the loan, one can't be too sure.
So, there won't be any traces of this loan / debt on the directors personal credit score?

dunstonh

So, there won't be any traces of this loan / debt on the directors personal credit score?

None.   

davetheraver

Looks like LTD company owners are already having ideas to liquidate the business and try write the debt off with it, I knew the crooks would be all over this.

Just be careful where that money goes, as they can still recover it from you. Regardless of the business being bankrupt or not, do not think you can just take the BBL money and pocket it, then write the business off with the debt along with it. They will want to know exactly where that money has been.

I spoke with my accountant regarding this, as I said to him this is crazy, and the amount of LTD companies dissolving in 6-18 months will be ridiculous. He agreed but also said it wont be that easy, and he specialises in account dissolvencies etc.

There are many of us genuine LTD companies who are struggling to even get out payments from the bank, and you have these crooks who will be trying to dissolve the business with the debt along with it. This will bite you in the backside, you really think the government are going to allow people to take this money as easy as that?

Galloglass

you really think the government are going to allow people to take this money as easy as that?

There is always the difference between the intent of government action and the effect. If both were the same, then there would be no need for all the court cases / redrafting of laws and guidance than there is.

As this is is being run through HMRC, then tax law comes into play. Tax lawyers are amongst the highest paid as there is a great deal of cash in determining where intent and effect are different. 

This will bite you in the backside

I agree this will come back and bite, but I disagree about the backside.

harryharry305

Most of these loans will get defaulted on

khanji17

Not planning to default, but when taking out the responsibility of the loan, under the current economic climate, one can't be careful enough, people are jumping at the chance of getting BBL but at the end of the day it has to be paid back. It is better to think and then rethink, how capable the business is to takeout x amount monthly after a year, if in unfortunate circumstances, when the business still fails, then as long as you have paperwork up to date of what happened to the loan, I think its alright.