Repayments of Bounce Back Loans
Due to the Coronavirus and its negative impact on businesses, the Bounce Back Loan Scheme (BBLS) was welcomed by many as part of the Government Support Scheme.
The BBLS was also very attractive to many individuals and their business with significantly lower interest rates than other bank loans, a deferred payment of 12 months, no early repayment penalty and no personal guarantee required. In addition, the Government has recently implemented an extension from 6 to 10 years in repayment of the loan.
The Government prevented all lenders from requesting a personal guarantee to protect Directors from been personally liable if unable to pay the loan. If your business is facing financial trouble and you are unable to meet the repayments, the liability will lie solely on the business itself.
As a result, the absence of a personal guarantee on the BBLS provides greater to protection to the Company Director.
Director duties and understanding the Bounce Back Loan Scheme
Upon applying for the loan, the Business Director is required to provide formal declaration that the business has been adversely affected due to COVID19 and their business was not experiencing any financial difficulty prior to December 2019.
Although the Bounce Back Loans have been beneficial in providing emergency funds for struggling businesses, it is important that Directors understand the finer details of these loan ensuring therefore that they are able to avoid breaching any of their fiduciary duties.
Although the government has temporarily eased wrongful trading regulations to assist businesses facing financial difficulty continue to trade during these difficult circumstances the rules around preferential payments and misfeasance (for not acting properly) remain in place.
If company funds are knowingly mishandled or misappropriated by a director then there could be a claim for misfeasance if eth Company were to be placed into liquidation. This is a breach of directors statutory and fiduciary duties. If this is proven, the director’s personal assets are at risk, and this can also result in them being disqualified from office.
These loans can be used to refinance borrowing that a company has already taken, however this is an area where professional advice must be taken and great caution will be necessary in order to avoid breaching statutory and fiduciary director duties.
Next Steps
If you are concerned that you are unable to repay your Bounce Back Loan, please call us and we will answer any queries you have.
If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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