Voluntary Liquidation DS01 held up by bank if outstanding balance on Bounce Back loan

[Marlowe]

Has anyone else come across this situation? A limited company took out a small (government-backed) Bounce Back Loan during the pandemic. After the pandemic, the company struggled on but with massively reduced turnover . After two years (and the Directors working without pay for 12 months!) the company was no longer viable as a going concern. Half the Bounce Back loan had, at this stage, been repaid. There were no trade debtors nor HMRC balances outstanding - just the BBL. There were no further assets to dispose of. The DS01 application was made and full, final accounts and Liquidators report produced. BUT the DS01 has been put on hold. The bank claims they have been instructed to do so by 'the government' if there is an outstanding balance on the BBL and they refuse to take any action. The Department of Business and Trade says "Oh no, the hold is only temporary to allow the lender to complete an investigation - presumably to ensure there are no assets to pay off the loan nor have assets been diverted that could have been used nor is there any fraud (of which there was a LOT around BBL's). So after 9 months nothing is moving. The Bank is (I assume) still adding interest to the loan - convenient since they know it's government-backed. There is no liability on the Directors of the company as a limited by liability concern. This can't be the only case of this??? Presumabmly there are millions of pounds of unrecoverable loans on the government's books.

[atticus]

I do not think that a liquidator should be using the voluntary strike off (DS01) procedure. A liquidation is concluded by dissolving the company.

Is the company in creditors' voluntary liquidation?

[atticus]

Just to be clear, a voluntary strike off is NOT a liquidation.

An unpaid creditor is entitled to object to a voluntary striking off. You should go down the formal liquidation route, or maybe just cease trading and see what happens.

[Marlowe]

Hi Atticus - many thanks for your response.

I thought I had posted a response this morning but I may have lost it unless it's under review - so sorry if this doubles up on what I've already posted. I probably didn't explain the situation well. The Directors initiated the voluntary liquidation. The company just ran out of cash. The company had been trading for over 10 years and the fixed assets fully written down and of no value. Trade creditors had been paid up to date, as had HMRC, The only creditor was the bank that had issued the BBL - which, as I said earlier, had about half the original value outstanding. The company ceased trading at the end of March 2023 and HMRC and the bank were informed and invited to discuss. As there was no cash available for an external liquidator, the owners appointed one of the Directors to act as liquidator (as they are entitled to do). Obviously, the bank has the right to challenge that appointment (but didn't).

The VAT account was closed, as was the PAYE registration and HMRC have confirmed nothing is owing. The trade debtors outstanding were collected and cleared the final VAT bill.The appointed liquidator produced a full report setting out how the assets had been liquidated and used. This was also sent to the bank along with the full and final accounts which were lodged with HMRC and Companies House. As far as I can see everything has been done by the book.

As you quite rightly point out creditors have the right to object to the striking off - which the bank did when the DS01 was submitted in June 2023. However, although the bank has confirmed (verbally) that they do not consider there to be any personal liability involved here and would be prepared to write off the loan (and presumably seek to recover the money from the government), they claim they are not allowed to do so under instructions from "the government".

When I spoke to the Department of Business and Trade about this they confirmed they had issued instructions to all lenders to put a temporary hold on DS01 applications if there was an amount outstanding on a BBL. BUT, they said this was only to give the lender time to investigate the application, presumably to ensure all assets have been accounted for and disposed of properly, and that was no evidence of fraud (which has been rife in the BBL scheme). They claim that if the bank confirms they have done this they will instruct the bank to release the hold.

So the liquidator is in a strange 'Catch 22' dilemma. Companies House won't approve the DS01 until the bank removes their objection, the bank won't remove their objection until told to do so by the government and the government won't tell them to remove the hold until the bank says it's OK to do so!!

I understand the dilemma and will be raising a challenge to Companies House (and the Department of Business and Trade) telling them to instruct the bank to 'get off the pot' by either taking legal action against the Directors (which I suspect will lead them nowhere) or writing off the debt. But my question is "How many of these are there???" Is this an isolated case or is this a major issue???

[atticus]

As there was no cash available for an external liquidator, the owners appointed one of the Directors to act as liquidator (as they are entitled to do).

I do not agree with that statement. A liquidator must (among other things) be a Licensed Insolvency Practitioner..

You have obviously gone down an informal route. This company appears not to be in liquidation.

You should either proceed with a proper liquidation or simply cease trading and cross your fingers.