Closing a Ltd Company with an outstanding COVID loan (BBL, CBILS, CLBILS, RLS)

If you are wanting to close your Ltd Company, and have a Bounce Back Loan which has debt still to be repaid to the lender, you will not be able to use the strike-off process to close your business.

There can be significant consequences for a Director trying to strike off in this situation, including personal responsibility for the debt and the potential for the company to be re-instated until the debt is paid, or the Director being disqualified from future Director positions.

At the beginning of 2021, the number of businesses using the striking-off procedure went up considerably. 

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act was introduced to help prevent directors from dissolving companies to avoid repaying Government-backed loans put in place to support businesses during the Coronavirus pandemic.  The Act amends the Company Directors Disqualification Act 1986 by giving the Secretary of State (SoS) (and in turn its executive agency, the Insolvency Service) the power to investigate the conduct of directors of companies that have been dissolved without having previously been in an insolvency process.

You can read more about the Act here:
Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill: policy factsheet - GOV.UK

Companies owing money with Bounce Back Loans need to use the liquidation process instead, through a voluntary or compulsory liquidation depending on the circumstances.  Then, if the lender is not able to recover the debt from the borrower, they can make a claim to the Government using the BBL Government guarantee.

You can read more about liquidation here: https://www.gov.uk/liquidate-your-company

If you have already applied to strike off and had an objection lodged against you, you will not be able to proceed with liquidation until the objection is removed.

There is also useful guidance on the British Business Bank website about transferring ownership of your company if you have an outstanding BBL:

Can the original borrowers named on the Bounce Back Loan Agreement be changed?

Adding a new borrower to an existing Bounce Bank Loan would represent new lending from a legal and regulatory perspective and because the Bounce Back Loan Scheme closed for new applications on 31 March 2021, a new Bounce Back Loan can no longer be issued. This means that new borrowers are unable to be added to the Bounce Back Loan Agreement.

Where an original borrower wishes to exit a Bounce Back Loan Agreement, this is permitted in certain circumstances and subject to conditions (such as when a partner wishes to exit a business partnership, or on the death or retirement of a partner provided that the remaining original partner(s) to the Bounce Back Loan Agreement agree to the exit and remain liable for the loan).

Existing borrowers are not prevented from reaching a voluntary arrangement for a third party to repay the Bounce Back Loan (such as, for example, new partners to a partnership voluntarily making repayments), however, the third party will not be added to the Bounce Back Loan Agreement and the original borrowers of the Bounce Back Loan still remain liable.

The Department for Business and Trade (DBT) has created a Q&A guide that explains the steps to take depending upon your situation.

The information provided below with respect to next steps applies to Bounce Back Loans (BBL) but also applies to the following government-backed Covid-19 loan schemes: the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Recovery Loan Scheme (RLS).

If any customers are unhappy about their experience with DBT (previously BEIS) and wish to complain, we have more details on the DBT (previously BEIS) Knowledge Bank article here:
https://knowledge.weareumi.co.uk/factsheet/?fsurl=dbt-department-for-business-and-trade

What is the Bounce Back Loan Scheme (BBLS)?

The Government launched BBLS to help the smallest businesses access the finance they need during the  difficult period of the COVID-19 pandemic.  As of 31 May 2021, more than 1.5 million BBLS facilities had been approved worth in excess of £47 billion. The scheme is now closed to new applications.

As a result of the amount of money made available to businesses and the breadth of the Government’s Covid-19 loan schemes, it has always been a primary aim to ensure public funds are used responsibly and helps those who need it most while minimising fraud risk. 



Why is DBT objecting to the strike-off of my company?

Because the Government’s Covid-19 loan scheme provides lenders with a government-backed guarantee of the outstanding loan, to protect its interests and to prevent misuse of the loan schemes, DBT will lodge an objection to a strike-off application where our records indicate that a company has an outstanding Bounce Back Loan Coronavirus Business Interruption Loan, Coronavirus Large Business Interruption Loan, or a Recovery Loan.
Please note, DBT cannot withdraw its objection to the strike-off of your company until they have received confirmation from your lender that matters have concluded and there is no longer an outstanding loan in place. Only your lender can advise on whether they there is no longer an outstanding loan and have updated your repayment information through its dedicated digital portal reporting system.



But I never took out one of these Bounce Back Loans?

Lenders routinely provide DBT (previously BEIS) with information on businesses that have taken out a government-backed Covid-19 loan, and the status of this loan.  If DBT has raised an objection to your strike-off application, it is because the information provided to them by lenders indicates that your company has an outstanding loan.

If you don’t believe you have ever taken out one of these loans, DBT can carry out a search of their records. To enable this, you will need to share with them the full details of your name and position at the company, the full name of the company and the company number.

If their records show that there is an outstanding loan associated with your company, they can help to identify the lender that made the loan and share this information with you. Because these are delegated schemes, the next step would usually be for you to contact the lender to resolve the matter.

To contact DBT about your strike-off objection if you believe you have never taken out a Bounce Back Loan, please email: [email protected]



I did take out one of these loans, but I cannot repay it and my company is no longer viable. Can you remove the strike-off objection?

Whilst DBT understand the difficulty of your circumstances, it remains their position to uphold their objection to a business striking off while there is an outstanding government-backed Covid-19 loan. If you have concerns about repaying your loan, they would encourage you to contact your lender in the first instance to discuss the matter further. 

It is recommended before you take any further action that you obtain your own legal or financial advice about this procedure and any other options available to you. You can get advice from your local Citizens Advice Bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner, any reputable financial adviser, or a debt advice centre.



If DBT will not remove its objection to my strike-off application because I have an outstanding loan amount that I cannot repay, what options are available to me?

In the first instance, businesses that have concerns regarding repaying debt should contact their lender.

Some borrowers will benefit from additional flexibility in making their loan repayments. That is why the Government introduced “Pay as You Grow”, which allows borrowers to tailor repayments to their individual circumstances. “Pay as You Grow” provides borrowers with the option to:

- Extend the length of their loan from six years ten, reducing average monthly repayments by almost half.

- Make interest-only payments for six months, with the option to use this up to three times throughout the loan

- Pause repayments entirely for up to six months

Borrowers can use these options either individually or in combination with each other. In addition, they have the option to fully repay their loan early and will face no early repayment charges for doing so.

If you wish to discuss the options available under “Pay as You Grow”, we advise you to contact your lender.

The British Business Bank has a range of guidance and resources available to all businesses, including content on managing your cashflow and a list of independent advice services. Details can be found at: www.british-business-bank.co.uk/finance-hub/dealing-with-debt/.



I have paid back my loan, why is the strike-off objection still in place?

DBT regularly receive updated information from lenders and objections will be automatically withdrawn when a loan is no longer identified as having an outstanding balance.

If you have repaid your loan, please note that it can take some time for an objection to be withdrawn.

You must contact your lender to ensure they have updated their systems to make DBT and the British Business Bank aware that you have fully repaid the loan.  DBT is unable to withdraw its objection until your lender confirms through their system that matters have concluded and there is no longer an outstanding loan.



I’ve been told my lender has updated my repayment information and it has been over a month since I repaid my loan. Why is DBT still objecting?

If DBT strike-off objection remains in place, this may suggest that your lender has not yet updated its systems.

DBT would advise that you contact your lender to request confirmation they have updated their systems so that DBT are made aware that the loan has been settled. It is also recommended that you establish from your lender the date on which this was done. DBT (previously BEIS) cannot withdraw its objection to the strike-off of your company until they have received confirmation from your lender that matters have concluded and there is no longer an outstanding loan in place.