Directors attempting to strike off by not filing accounts and confirmation statements or voluntarily applying by DS01 to dissolve companies with outstanding bounceback loans are subsequently objected to by The Government. It’s not actually your bank.
“In March 2021, the department entered a blanket objection to any company with an unpaid bounce-back loan being struck off the register. This action has ensured that lenders can continue to make recoveries on loans due to be repaid and will ensure that the public purse is protected.“ Lord Callanan – Hansard | Volume 815: debated on Tuesday 19 October 2021
When an objection and suspension takes place, it is supposed to act as the final prompt for directors to act responsibly and take the correct steps to wind their company up via a liquidation process, such as a creditors’ voluntary liquidation (CVL).
A creditors’ voluntary liquidation (CVL) supervised by a Licensed Insolvency Practitioner puts your company and its debts, including your Bounce back Loan, to rest for good.
What happens currently?
If the company hasn’t been through a liquidation process, the bank has to attempt to claim on their government guarantee within 12 months of the loan going into default, typically 2-3 months after the last payment.
With a 100% guarantee on offer or indeed paid out, lenders have limited incentives to seek a full recovery but the onus on collection still falls on the bank.
The UK government however has removed state guarantees from almost £1bn in Covid-19 emergency loans, pushing potential losses on to banks if borrowers fail to repay them.
HM Treasury agreed a recovery process in December 2020 on Enforcement (agreed between lenders and the government) which appears to have said:
“Enforcement is not expected unless in the event of serious or organised fraud, or borrowers refusing to pay but has assets.”
What happens once the limited company is dissolved?
- The Bank can register a CIFAS fraud marker without notifying you. An example from HSBC https://ibb.co/kKgX2tK
CIFAS markers are shared with other financial institutions and jeopardize personal and business applications for mortgages, credit, bank accounts or even smaller services like phone contracts.
- The Government complains to The Insolvency Service. The Insolvency Service using new powers granted in December 2021, investigates directors of dissolved companies who are suspected of closing their business to avoid repaying Covid-19 support loans. https://www.gov.uk/government/publications/dissolved-company-investigations/dissolved-company-investigations
- Director Disqualification. When you receive the Section 16 letter from the insolvency service, take legal advice. It is essential that you understand what Director Disqualification means and the impact it has on your ability to trade going forward including not being involved in the promotion, formation, or management of a company. https://www.gov.uk/company-director-disqualification
- Disqualified directors risk being held personally liable for company debts. Check any amount being proposed to repay creditors by Compensation Order, The lnsolvency Service enforces this debt by pursuing you through the courts and using personal assets including home and pensions to recover money. https://www.gov.uk/government/publications/director-disqualification-a-guide-to-compensation-orders/a-guide-to-compensation-orders
- Recorded on The Companies House disqualified directors register.
https://www.gov.uk/search-the-register-of-disqualified-company-directors
- Negative Publicity.
Boss claimed £25,000 before closing the business in effort to avoid repaying taxpayer loan
https://www.gov.uk/government/news/london-businessman-convicted-for-bounce-back-loan-fraud
Falsely claimed Bounce Back Loans totalling around £69,000 before dissolving their companies
Four directors disqualified for dissolving companies and walking away without paying their debts
https://www.gov.uk/government/news/directors-banned-for-abusing-dissolution-process–2
CIFAS markers a new payment tactic?
The Bank can register a CIFAS fraud marker against a director without notifying them.
A recent example from HSBC https://ibb.co/kKgX2tK
CIFAS markers are shared with other financial institutions and jeopardize personal and business applications for mortgages, credit, bank accounts or even smaller services like insurance or phone contracts.
The institution that actually instigated the marker doesn’t legally have to explain themselves, so CIFAS is the only place to find answers. You can check with CIFAS here https://www.cifas.org.uk/dsar.
And repaying the BBL at this stage will not remove the marker.
The Government retrospectively beefed up their director disqualification and compensation order process extending The Insolvency Services powers to businesses that are struck off and there has been a steady uptick but many business remain live.
If you still want to fix this before the company is struck off, Emerald offers personalized guidance and peace of mind to directors and we’re happy to answer your questions and your accountants or other advisors queries too.