The simple answer is that, no, you cannot legally strike off a company with an outstanding Bounce Back Loan. Striking off a company with unsettled debts could result in legal consequences and potential investigation by the government.

If you find yourself in this situation and seek tailored advice, our team is available for consultation. We are currently advising multiple clients facing similar challenges and can offer experienced guidance on your options.

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Can I Strike off a Limited Company with a Bounce Back Loan?

No, you cannot strike off / dissolve a company with a bounce back loan.

To strike off a company, it must have no debts or liabilities. A bounce back loan is a debt, so it must be repaid before the company can be struck off.

If you are struggling to repay your bounce back loan, you should contact the lender to discuss your options. They may be able to offer you a repayment plan or other help.

If you are unable to repay your bounce back loan, you must enter into a formal insolvency process like a Creditors’ Voluntary Liquidation (CVL).

It is important to note that striking off a company with a bounce back loan is a serious offence and could lead to criminal prosecution.

If you are considering striking off your company, you should seek professional advice from licensed insolvency practitioners such as ourselves. We can help you understand your options and the consequences of striking off your company.

What is Likely to Happen if You Strike Off or Dissolve a Limited Company with a Bounce Back Loan?

If you try to dissolve a limited company with a bounce back loan, you will receive a letter from Companies House known as the “Objection to Company Strike Off Notice.” This letter indicates that Companies House has identified that the company has debts and that your requested action is being questioned.

Objections to company dissolution are often triggered by HMRC, which has officers monitoring directors who attempt to avoid tax liabilities by dissolving their companies. In the case of bounce back loans, objections are also likely to come from the finance provider to whom the loan is owed. Despite HMRC’s guarantee of these loans, the responsibility for chasing defaults remains with the banks, who have been asked to use their normal debt enforcement protocols.

Of course, any strike-off action by directors must comply with the statutory requirements to inform creditors. As stated on the government site: “If your company has creditors, members, employees, etc., you should inform all the necessary people before applying.”

What are the Criteria for Striking off a Company?

The criteria for striking off a company in the UK are as follows:

  • The company must have no debts or liabilities.
  • The company must not be trading or carrying on any business.
  • The company must not be involved in any legal proceedings.
  • The company must have given notice to all of its creditors of its intention to be struck off.
  • The company must have published a notice of its intention to be struck off in the Gazette.

If the company meets all of these criteria, it can apply to Companies House to be struck off.

If I’ve Struck Off the Company with an Existing Bounce Back Loan, Could HMRC Reinstate it?

HMRC can indeed reinstate a company if it’s been struck off incorrectly, and this can happen at any period in the future.

For directors thinking that perhaps a strike off might provide a quick solution for company closure, there will be continuous uncertainty ahead, unless you address the debts before attempting to dissolve.The law pertaining to this can be found in Section 1003 (6) of the Companies Act which states that, even if struck off, “The liability (if any) of every director, managing officer and member of the company continues and may be enforced as if the company had not been dissolved.” 

What’s the Correct Way to Close a Limited Company with a Bounce Back Loan?

If you wish to close a company and you took a Bounce Back Loan, it is still possible to eradicate the debt and close the limited company.

With a voluntary liquidation, a licensed insolvency practitioner deals with the company creditors, sells any assets to pay debts and finally strikes the company off as part of the process.

If you’re concerned that you may not have funds, it might be possible to apply for director’s redundancy payments, which are offered by HMRC as long as you’ve been trading for 2 years.

Read our full article on directors’ redundancy payments and find out if you’re eligible.

Article sources

All of our insolvency content is written licensed insolvency practitioners. The primary sources are listed below. Learn more about the standards we follow in our editorial guidelines here.

  1. Insolvency Practitioners are suggested to report potential cases of Bounce Back Fraud here: https://www.tax.service.gov.uk/shortforms/form/TEH_IRF?_ga=2.131819727.192362486.1597067537-679006552.1591708728
  2. Insolvency Service takes action against businesses abusing COVID-19 financial support – https://www.gov.uk/government/news/insolvency-service-takes-action-against-businesses-abusing-covid-19-financial-support