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Dissolving a Company with a BBL

Do Accountants know that you can't just dissolve a company if it has a Bounce Back Loan?

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We are receiving lots of calls from company directors whose companies are no longer viable, stating that their accountant has tried to dissolve the company, but it has been rejected.  I am sure they are in the minority but if your client has an outstanding Bounce Back Loan the lender will NOT allow the company to simply be dissolved.

This is because the lender can only recover the money from the government IF AND WHEN the company enters a ‘formal insolvency process’ such as voluntary liquidation. If the lender allows the company to be dissolved it will not be repaid by the government. The lender must issue a demand for repayment and if not repaid in full can issue a winding-up petition in court (from this Friday 1st October for debts over £10,000)

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By Justin Bryant
28th Sep 2021 13:11

There have been comments here along those lines and IPs are going to be pretty busy after 1.10.21 in that case.

In fact, a big market may well develop in buying these c£50k BBL claims (against directors under IA 1986 re unlawful distributions etc.) from the lending banks.

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Replying to Justin Bryant:
paddle steamer
By DJKL
28th Sep 2021 13:17

Not sure with only £50k at stake there is enough meat on the bone to pursue directors, I suppose if you buy enough of them and bully enough unrepresented directors there might be a business model (low hanging fruit) but to me the debt level looks a tad low- distressed debt tends to be sold in larger chunks.

(Is there a one size fits all automated approach that could do the business or would each case need to be dealt with on a bespoke basis, because proving the director's actions (withdrawing the funds) when the director will not cooperate will not be straightforward ?)

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Replying to DJKL:
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By Justin Bryant
28th Sep 2021 13:33

It's not my specialist area, and I agree £50k is possibly not quite big enough, but we are talking probably about middle class director types mostly who would more likely be a better target to shake down so to speak than the usual scallywag crowd who make walking away from bust companies a sort of profession.

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Replying to ksagroup:
Stepurhan
By stepurhan
28th Sep 2021 14:32

A good topic worth discussing.

But the link you provided is not "the page" re dissolution (if such a thing exists). This is an article on one of your own websites.

It is not just tacky to promote your services in this way, it is against the site rules.

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Replying to ksagroup:
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By rmillaree
28th Sep 2021 17:42

ksagroup
per linked website
"The best option if faced with this situation is for you to liquidate your company."
Well of course your firm would say that wouldnt they.

If we say a company has spent its bounceback loan(on company expenses not syphoned off by director) has no funds and is left with bounceback loan liability and no other liabilities or assets.

can director not simply write to bank advising there are no assets no other liabilities company has ceased trading and ask the bank to take whatever action they see fit?

Is there any onus on the director to go down liquidation route if they dont want to fund the expense of taking that route themselves? I.e can they pass the buck onto the bank to decide what shoukld be done?

Cheers

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Replying to rmillaree:
By ksagroup
29th Sep 2021 10:14

rmillaree wrote:
If we say a company has spent its bounceback loan(on company expenses not syphoned off by director) has no funds and is left with bounceback loan liability and no other liabilities or assets.

Indeed, if that were the case then the director doesn't have much to worry about except it will take a long time to sort and won't be able to start a new company with similar name etc etc. That said the above is not always the case and we would advise that directors do not run their company cash down to nothing. That is a difficult task and some end up expose themselves to risk on personal guarantees and maybe held liable for the debt personally if there is any wrongdoing.

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Replying to ksagroup:
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By rmillaree
29th Sep 2021 12:42

"That said the above is not always the case and we would advise that directors do not run their company cash down to nothing. "
Lol - are these loans not advanced for the exact specific reason of covering business overheads to try and make them succeed through covid? - are you saying they should park half the loan just in case they may need a liquidator.

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paddle steamer
By DJKL
28th Sep 2021 14:39

So, give us the inside track, is it currently boom time in the insolvency profession, should I be perhaps repurchasing my Begbies Traynor shares (I made a small profit on them last year)?

We actually dealt with your Berwick office last year re a CVA you did for one of our tenants, albeit sadly it did not get through 2021 and they subsequently went into liquidation in June/July this year.

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Replying to DJKL:
By ksagroup
28th Sep 2021 15:07

Corporate insolvencies are way down on any normal period pre-pandemic so all UK businesses must be doing really well. They have been able to downsize gradually whilst supported by the government. The problem will be felt most acutely in personal insolvency (not our area) as jobs are lost etc. We do try and educate directors to tell them that it is in their best interests ( and ours obviously) to act quickly if the business is in financial difficulty.

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Replying to ksagroup:
paddle steamer
By DJKL
28th Sep 2021 15:19

Could this be partly because of the various HMG supports and the inability of creditors, in some cases, to act?

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Replying to DJKL:
ALISK
By atleastisoundknowledgable...
29th Sep 2021 10:35

An IP I know has doubled his staff to 20 in the last 6 months.

He’s done 3 MVLs for different clients on mine each with c£20k cash in bank and a £50k BBL. In the main trading issues, nothing too outrageous from the director(s) other than maybe a £30k salary not £8.5k.

I spoke to him last June and predicted this year’s growth!

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Replying to atleastisoundknowledgable...:
By ksagroup
29th Sep 2021 10:50

You mean CVL presumably?

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Replying to ksagroup:
ALISK
By atleastisoundknowledgable...
29th Sep 2021 14:53

Yes, of course, my bad.

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By MissAccounting
28th Sep 2021 15:07

Genuine question/comment but what is realistically going to happen to a director/company that attempts to dissolve the company, objection raised but then decides to just ignore everything from that point?

Surely unless HMRC actually start to go after the director's then we are just going to end up with thousands of ghost companies? Even then is it worth it where there are no accounts, no assets and no details of possible losses or creditors etc or in fact where the BBL has gone?!

I've already had a number of clients who have had that "man down the pub" conservation about closing their company without repaying the BBL!

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Replying to MissAccounting:
By ksagroup
28th Sep 2021 15:11

The issue isn't HMRC. It is what will the banks do? The banks will not get their money back on BBLs unless there is an insolvency event. It will require a change in the law or a change in the "contract" the Government had with the banks. I suspect that there is going to be some difficult negotiation ahead.

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Replying to ksagroup:
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By Justin Bryant
28th Sep 2021 15:25

So let's all short big bank shares in that case (you heard it here first).

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Replying to Justin Bryant:
paddle steamer
By DJKL
28th Sep 2021 15:44

I never short, but with banks I might make an exception. (I had a miserable week last week trying to deal with Swedbank and getting someone to actually respond)

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Replying to ksagroup:
Flag of the Soviet Union
By thevaliant
29th Sep 2021 10:39

Well, banks are notorious in this profession for not wanting to pay anything but wanting to pass costs on to someone else.

If the director won't fund the liquidation, and neither will HMRC, then the bank would have to.

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Replying to thevaliant:
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By Justin Bryant
29th Sep 2021 10:45

Not necessarily. The bank can assign the claim to an ambulance chaser IP (or the claim against the directors can be funded by the same or a big litigation funder outfit).

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Replying to Justin Bryant:
Flag of the Soviet Union
By thevaliant
29th Sep 2021 11:48

Then I think a lot will depend on the directors personal circumstance.

If they're bankrupt themselves (or have simply run off), then chasing them under a personal claim will not succeed either, as they won't be able to pay.

I'm sure IP will have a busy few months, but I equally suspect a lot of companies will not be properly investigated for lack of ready funds to do said investigations.

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Slim
By Slim
28th Sep 2021 15:48

If there’s a big wave how will banks, IPs etc be able to cope?

I’ve heard of some who have successful dissolved with a BBL.

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By ksagroup
28th Sep 2021 16:02

I suspect those loans of just a few thousand will be let through as that is less than the cost of legal action. £6k+ unlikely. Also they can be resurrected years afterwards

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Replying to ksagroup:
Slim
By Slim
28th Sep 2021 16:08

Yes I wondered if would be reinstated

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Replying to ksagroup:
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By rmillaree
29th Sep 2021 12:45

ksagroup
"I suspect those loans of just a few thousand will be let through as that is less than the cost of legal action. £6k+ unlikely. Also they can be resurrected years afterwards"
Ok if you are saying this may work why were you saying at the start of the thread directors cant go down this route - surely you need to make up your mind what peeps can and can't do? - if they can do it sometimes do go rounding telling them they cant and they need to sign up with you please.

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Replying to ksagroup:
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By rmillaree
29th Sep 2021 12:45

ksagroup
"I suspect those loans of just a few thousand will be let through as that is less than the cost of legal action. £6k+ unlikely. Also they can be resurrected years afterwards"
Ok if you are saying this may work why were you saying at the start of the thread directors cant go down this route - surely you need to make up your mind what peeps can and can't do? - if they can do it sometimes do go rounding telling them they cant and they need to sign up with you please.

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Replying to rmillaree:
By ksagroup
29th Sep 2021 13:00

Look as I said before the banks are stopping directors from dissolving companies if they have a significant BBL. Also, I am pointing out that they should go down the liquidation route if they have other debts as that is less risky for them and draws a line under the matter. I can't edit the original post but yes it is possible that if the debt is very small then the banks may not bother and of course, it wouldn't be viable or fair to the creditor/bank for us to get involved.

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By ksagroup
28th Sep 2021 16:02

I suspect those loans of just a few thousand will be let through as that is less than the cost of legal action. £6k+ unlikely. Also they can be resurrected years afterwards

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By sanjay100
28th Sep 2021 16:26

The whole situation is just farcical. Company maybe viable but not if the director has been reckless

Will anyone care these directors who went on a lavish spending spree with the free cash. Probably couldn't be bothered to pay any taxes on the distribution either. At least our insolvency friends dreams have come true.

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Replying to sanjay100:
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By wingman22
30th Sep 2021 15:52

Just like furlough was a dream for GP accountants. Lots of extra work to do.
By dream did you mean nightmare?

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By djn
29th Sep 2021 12:55

I think that what will happen is that the strike off action will keep being reapplied until it eventually works and the company is struck off. It may well take a year or two but the directors will just ignore any correspondence and it will all just grind to a halt.

It's not right and I know that some directors have taken the BBL's and spent it personally. They had no intention of ever paying it back. Free money they say.
Time will tell if the banks do recover these debts but if I had to give my opinon then I would say it is unlikely.

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