Dissolving A Company With a CBILS Loan: The Latest

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill granted additional investigatory powers to the Insolvency Service, as well as expanding existing powers to disqualify directors of dissolved companies. This is an important development for any director who is considering dissolving or liquidating their business. Especially if that business took a CBILS loan.

Previously, a director could only be investigated & disqualified if the company was still active. The process often became complicated and drawn out if the company has been previously dissolved. This bill seeks to simplify this process by amending the Company Directors Disqualification Act 1986.

There are 3 main drivers behind the introduction of this legislation:

1. Prevent the dissolution of companies to avoid investigation into the directors
2. To prevent ‘pre-pack’ administration i.e. the dissolution of companies to shed liabilities and transfer assets to a new company
3. To prevent directors from using the company dissolution process as an alternative to formal insolvency proceedings

For an investigation to be conducted, an interested party will have to raise concerns about a company’s director(s). Dissolved companies do not have an external person/body with a duty to investigate their conduct. However, creditors are informed of the potential dissolution so can make a complaint to aid recovery of funds. As a result, many businesses that borrowed under the CBILS & BBLS schemes are now finding themselves under investigation.

What Does it Mean For Directors?

Due to the retroactive nature of this bill, any director of a company dissolved in the past 3 years can be investigated. They will be subject to the same level of scrutiny as that of an active company.

If you are found to have acted irresponsibly you can be disqualified from being a director for up to 15 years. In some cases, if you are disqualified, you can also be made liable for the company’s debts, even if they are not personally guaranteed.

What if I Have a CBILs/BBLs Loan?

This Bill was introduced as a consequence of perceived misuse of the government-backed CBIL and BBL schemes. As a result, recipients of BBLS and CBILS loans are likely to find themselves under a higher level of scrutiny. Nearly £75 Billion of loans were given out in the time that the schemes were open. During this time lenders were encouraged to relax due diligence processes and were allowed to give loans to non-viable companies.

There are now many who are unable to repay their loans and are under the belief that the dissolution of the limited company is their best option. This is not the case.

Have you or are you planning to dissolve a limited company? You may find yourself under the microscope. If your conduct is found to be questionable, it could have dire consequences for you and your business.

If you are worried about your business’ ability to maintain loan payments, are concerned about dissolution/liquidation or have previously dissolved your limited company, get in touch with our team today to discuss your options. You can call us on 0333 305 4331 or email us at [email protected]