Many directors choose to strike off or dissolve a company as a cost-efficient way to close it down. But this isn’t an approach you can choose when your company has debt.
This means that if your limited company has an outstanding bounce back loan, dissolution is not the correct option, as we’ll explore below.
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Dissolving or Striking off a Company with a Bounce Back Loan
The criteria for dissolving a company is as follows.
- It should have no debt
- Accounts should be up to date
- Has not traded or changed it’s name in the last 3 months
- Should not be in liquidation or have agreements with creditors such as a Company Voluntary Arrangement
Clearly, the existence of a bounce back loan means that a company fails the first of these criteria, and hence it won’t be possible to seek the easy solution of simply striking off.
Rather, the appropriate method is to see a voluntary liquidation using the services of an accredited and licensed insolvency practitioner.
What Will Happen if you Try to Dissolve a Company With a Bounce Back Loan?
Since all strike off applications are publically advertised in the London Gazette, which is the journal of public record, creditors may see your attempt to dissolve the company and lodge a formal objection.
Equallly, HMRC has staff members at Companies House whose job it is to scrutinise any Strike Off Applications and check against existing debts.
In fact, even if you successfullly managed to strike off the company using Form DS01, a creditor could lodge an objection after the fact and apply to have your company formally reinstated so that they can force you into compulsory liquidation.
In shortl it’s simply not worth atttempting this method as you will never gain the peace of mind that everything is settled.
How to Close a Limited Company With Debt
Closing a company with debt must be done via liquidation, using the services of a licensed insolvency practitioner.
It’s not possible to liquidate the company yourself; the law requires you use an IP to ensure fair play for creditors. In this case, the creditors will be the financial services provider, such as a bank, you took out the bounce back loan with.
Our suggestion is to talk to our reccomended insolvency practitioners about your situation. If you’re concerned you won’t have the money to pay for the process, they will explain your situation to you in clear language, including how the money might be found. Sometimes, directors redundancy payments may be an option if your company has been trading for at least two years, and the director is classified as an employee.
