Reply to: Bounceback loans - Free year ending soon

[vwdan]

Decided to just pay mine back in full

[BlasterBates]

This outlines what happens if you liquidate your company with an outstanding bounce back loan.

https://www.aabrs.com/bounce-back-lo...d-liquidation/

When a business enters into a formal insolvency procedure, any transactions made during and in the period leading up to the insolvency will be scrutinised by the insolvency practitioner. If they find that the Bounce Back Loan was used to make payments to certain creditors and not others, you could be made personally liable to the value of the payment. The transaction will also be scrutinised by the Insolvency Service to determine whether you should be disqualified from operating as a director in the future.

The insolvency practitioner charges huge fees and if he does find you liable he'll be expecting you to cover those. This is his raison d'etre, he will be highly motivated to find you liable.

[BlasterBates]

That's a good point but isn't the bank the creditor? The government should refund the bank if the loan becomes insolvent. They even gave guidelines for recovery practice for the bank. I haven't read anywhere that the government was going to buy back all the defaulted loans and take them into their book to do the recovery themself.

Once the loan is defaulted, the government takes over the loan pays the bank and automatically becomes the creditor.

[Paralytic]

I haven't read anywhere that the government was going to buy back all the defaulted loans and take them into their book to do the recovery themself.

What else have you not read that you've therefore assumed will not happen?

Why would the government not sell on the defaulted loans, even for just 10% of their book value? I'd say they'd have a duty to the taxpayer to do exactly that!

They could sell them to some company in the IOM.

[cwah]

There's a difference between private creditors and the government. A unpaid electricity bill won't be chased if your company goes insolvent, an unpaid tax bill will be very agressively. I would treat a 50 grand debt default with a great deal more respect than a few individual creditors.

That's a good point but isn't the bank the creditor? The government should refund the bank if the loan becomes insolvent. They even gave guidelines for recovery practice for the bank. I haven't read anywhere that the government was going to buy back all the defaulted loans and take them into their book to do the recovery themself.

[BlasterBates]

It's interesting what you all wrote like some receivers are going for any possible way to recover creditors monies... I know my knowledge is limited but I've in the past put my life saving in P2P loans where the assets were secured against properties.

I've seen so many sheningan from company directors and obvious fraud, going from insolvencies to insolvencies then changing their name slightly in company house not to be tracked.

As investors, we can only assist in what's happening and these receiver/administrators who are supposed to save the game were just sucking up dry any money they could. These expensive guys as you say they charge like £500/h. Yes, per hour. They work a day and that's £4k out. And they'll drag the case for YEARS charging millions in fees.

Unless there are large amounts involved or obvious case of fraud, I don't think they'll appoint administrators to thoroughly examine the case because the bank will lose WAY more money than they can recover. They'll definitely appoint some administrator to check the case, but it would be a quick review to check if there's anything obvious that stand out and easy to win.


I'm not saying there are no risk, and you are right it's not just walking away. But it's certainly not as risky as you say it is.

There's a difference between private creditors and the government. A unpaid electricity bill won't be chased if your company goes insolvent, an unpaid tax bill will be very agressively. I would treat a 50 grand debt default with a great deal more respect than a few individual creditors.

[eek]

It's interesting what you all wrote like some receiver are going to come for any possible way to recover creditors... I know my knowledge is limited but I've in the past put my life saving in P2P loans where the assets were secured against properties.

I've seen so many sheningan from company directors and obvious fraud, going from insolvencies to insolvencies then changing their name slightly in company house not to be tracked.

As investors, we can only assist in what's happening and these receiver/administrators who are supposed to save the game were just sucking up dry any money they could. These expensive guys as you say they charge like £500/h. Yes, per hour. They work a day and that's £4k out. And they'll drag the case for YEARS charging millions in fees.

Unless there are large amounts involved or obvious case of fraud, I don't think they'll appoint administrators to thoroughly examine the case because the bank will lose WAY more money than they can recover.


I'm not saying there are no risk, and you are right it's not just walking away. But it's certainly not as risky as you say it is.

Remember the people reclaiming the money are the ones with full access to your business bank account transactions - that's very different from a P2P loan scheme where the lender hasn't a clue what is going on.

[cwah]

It's interesting what you all wrote like some receivers are going for any possible way to recover creditors monies... I know my knowledge is limited but I've in the past put my life saving in P2P loans where the assets were secured against properties.

I've seen so many sheningan from company directors and obvious fraud, going from insolvencies to insolvencies then changing their name slightly in company house not to be tracked.

As investors, we can only assist in what's happening and these receiver/administrators who are supposed to save the game were just sucking up dry any money they could. These expensive guys as you say they charge like £500/h. Yes, per hour. They work a day and that's £4k out. And they'll drag the case for YEARS charging millions in fees.

Unless there are large amounts involved or obvious case of fraud, I don't think they'll appoint administrators to thoroughly examine the case because the bank will lose WAY more money than they can recover. They'll definitely appoint some administrator to check the case, but it would be a quick review to check if there's anything obvious that stand out and easy to win.


I'm not saying there are no risk, and you are right it's not just walking away. But it's certainly not as risky as you say it is.

[eek]

An insolvency process is not something where you "walk away". The government as a creditor will have the right to appoint a receiver, a very expensive lawyer will be appointed whose raison d'etre is to take you to the cleaners.

Not quite -

His raison d'etre is to find a way or a means to make the company's debt the director's (i.e. your) personal responsibility

And then taking both you and the company to the cleaners.

[BlasterBates]

That's expected they'll follow the process. However there isn't any personal liability, so unless there is fraud, the director isn't liable and can just walk away.

An insolvency process is not something where you "walk away". The government as a creditor will have the right to appoint a receiver, a very expensive lawyer will be appointed whose raison d'etre is to take you to the cleaners.

[jamesbrown]

https://amp.ft.com/content/8d7851c3-...3-235aeb1e5674

Ministers will crack down on company directors seeking to dissolve their businesses to avoid repaying creditors in a bid to prevent the loophole being exploited to write off state-backed emergency Covid-19 loans.

The Insolvency Service will be given beefed up powers to investigate and sanction directors found to have abused the process. The measures, which are part of bill put before parliament on Wednesday, will also give the government agency retrospective powers.

[Paralytic]

No I didn't. I just read it through and it makes sense not to pay some relative instead of the creditor.

Although I still say if paying salary + pension as it was done the previous years should be fine because it wouldn't be preference payment.

I suspect a contractor who had no active or future contract at the time of taking out the BBL, and who then used the BBL to pay into their pension (eg, it was not paid from retained profits), might have some questions to answer should they then try to fold the company with the debt outstanding.

[northernladuk]

Yes but that's expected for any company that you fold... especially if you have debt.

Of course if you made illegal payment the director will be liable because it is... illegal.

But pay yourself salary and pension should be all good because it's all legal.

Every time you post it's absolute crap and just causes more and more confusion. Just stop and think before you post FFS. Better still, just don't bother. You cause more problems on here that help.

[cwah]

Your "oh, you can just walk away" vibe is pish. The only conditionality you offered was "fraud", which is a misunderstanding. It may or may not be fine, depending on what you did. I bet you don't even know what a preference payment is, do you?

No I didn't. I just read it through and it makes sense not to pay some relative instead of the creditor.

Although I still say if paying salary + pension as it was done the previous years should be fine because it wouldn't be preference payment.

[jamesbrown]

Yes but that's expected for any company that you fold... especially if you have debt.

Of course if you made illegal payment the director will be liable because it is... illegal.

But pay yourself salary and pension should be all good because it's all legal.

Your "oh, you can just walk away" vibe is pish. The only conditionality you offered was "fraud", which is a misunderstanding. It may or may not be fine, depending on what you did. I bet you don't even know what a preference payment is, do you?