Closing a company with a Bounce Back Loan does not automatically write off the debt. If the company cannot repay what it owes, the correct route is normally formal liquidation rather than simple dissolution, because a lender or Companies House can object to a strike-off while a loan is outstanding.
Many directors assume that dissolving a company makes its debts disappear along with it. That is rarely true. This article explains why striking off is often blocked, what happens to a Bounce Back Loan (BBL) in liquidation, and when a director might face personal liability.
This is general guidance for directors thinking through their next step, not a substitute for advice from a regulated insolvency practitioner.
Closing a company with a Bounce Back Loan: can you just strike it off?
In theory, any director can apply to Companies House to strike off (dissolve) a company using form DS01. In practice, closing a company with a Bounce Back Loan through a simple strike-off rarely goes smoothly if the debt is still outstanding.
Before applying, the law requires directors to notify all creditors, including the bank or lender that provided the BBL. Once notified, the lender has the right to object. Most BBL lenders do object, because striking off does not settle the debt — it simply removes the company from the register while the money is still owed.
- A striking-off application must be preceded by no trading or "activity" for three months.
- Creditors, including BBL lenders, must be told within seven days of the application.
- Any creditor can lodge an objection with Companies House, which pauses the process.
What happens if you strike off anyway without telling the lender?
Failing to notify a creditor is a legal requirement, not an optional courtesy. If a director dissolves a company without informing the lender, the lender can apply to have the company restored to the register specifically so it can pursue recovery of the loan, and the director's conduct may come under scrutiny.
Why lenders and Companies House can object to dissolution
A Bounce Back Loan is backed by a government guarantee to the lender, not a guarantee that the borrower never has to repay it. Lenders remain the creditor and are expected to pursue recovery before calling on the guarantee, which is one reason they routinely object to a dissolution.
Companies House itself can also reject or suspend a strike-off application if it becomes aware of outstanding liabilities, ongoing insolvency proceedings, or a live objection. This is designed to stop companies avoiding their debts by simply disappearing from the register.
Where an objection is upheld, the strike-off application is discontinued and the company remains an active, registered entity — still carrying the unpaid Bounce Back Loan on its books. Every accepted strike-off application is also advertised as a notice in The Gazette, giving creditors a further opportunity to object before the company is actually dissolved.
Liquidation as the proper route when debts can't be paid
When a company genuinely cannot pay its debts, including a Bounce Back Loan, the appropriate formal process is usually liquidation rather than dissolution. For most insolvent companies, this means a Creditors' Voluntary Liquidation (CVL), a process governed by the Insolvency Act 1986.
In a CVL, the directors instruct a licensed insolvency practitioner, who is then appointed liquidator by the creditors. The liquidator takes control of the company's assets, deals formally with all creditors (including the BBL lender), and closes the company down in an orderly, legally recognised way.
- Liquidation formally ends the company's ability to trade.
- All creditors are dealt with under a single, transparent process.
- The company is eventually dissolved once liquidation is complete.
If you are struggling to keep up with repayments before reaching this point, it can help to understand your options first — see our guide on what to do if you can't repay your Bounce Back Loan.
What happens to the loan when the company is liquidated
Once liquidation begins, the Bounce Back Loan becomes a debt owed by the company to the lender, dealt with alongside the company's other liabilities. The liquidator reviews the company's financial position and reports on how the loan was used and how the business came to fail.
If the company's assets are insufficient to repay the loan in full — as is common with small, asset-light businesses — the shortfall is written off as part of the liquidation, provided the loan was used properly and the director has not acted improperly.
The lender can then claim against the government's 100% guarantee for the unrecovered portion. This is a claim by the lender against the guarantee scheme, not a personal demand against the director, provided the loan was taken out and used in good faith.
Does the director have to repay it personally?
A Bounce Back Loan was taken out by the limited company, not by the director personally, and lenders were not permitted to take personal guarantees for BBLs. This means that, in most cases, a director closing a company with a Bounce Back Loan through proper liquidation is not personally liable for the shortfall.
However, personal liability can arise in specific circumstances, such as:
- The loan money was used for something other than the business's economic benefit (for example, personal spending).
- The director provided false information when applying for the loan.
- Wrongful or fraudulent trading is found once the company is insolvent.
- Money was withdrawn from the company shortly before liquidation in a way that unfairly favours the director over other creditors.
If any of this applies, the liquidator can report the director's conduct, and separate recovery action or director disqualification proceedings may follow. If you are unsure where you stand, our article on personal liability for a Bounce Back Loan covers this in more detail.
The role of the government guarantee
The Bounce Back Loan Scheme carried a 100% government guarantee to the lender, introduced to encourage banks to lend quickly during the pandemic. That guarantee sits between the lender and government — it does not remove the debt from the company, and it is not a guarantee to the director.
When a company is liquidated and cannot repay the loan, the lender first tries to recover what it can from the company's assets through the liquidation process. Only the unrecovered balance is then claimed against the government guarantee. This is why proper liquidation, rather than an attempted quiet dissolution, matters: it is the process that allows the guarantee to be claimed correctly.
For background on the wider process of closing an indebted company, see our guide to how to close a limited company with debts.
Frequently asked questions
What's the difference between dissolution and liquidation for a company with a Bounce Back Loan?
Dissolution (strike-off) is an administrative removal from the Companies House register, intended for companies with no significant debts. Liquidation is a formal legal process for winding up a company that cannot pay what it owes, including a Bounce Back Loan, and dealing properly with creditors.
Can Companies House refuse to strike off my company?
Yes. If a creditor such as a BBL lender objects, or if Companies House becomes aware of outstanding debts or insolvency, the strike-off application can be rejected or suspended.
Will I be chased personally for the Bounce Back Loan write off?
Not usually, provided the loan was used for the business and the company is liquidated properly. Personal guarantees were not permitted for BBLs, so recovery is normally limited to the company, unless there is evidence of misuse or improper conduct.
How long does liquidation of a company with a Bounce Back Loan take?
Timescales vary with the complexity of the company's affairs, but a straightforward Creditors' Voluntary Liquidation is often concluded within a matter of months from the initial creditors' decision, with formal dissolution following later.
Does liquidation cost the director money?
Liquidator fees are usually paid from the company's remaining assets where possible. Where a company has little or no assets, a licensed insolvency practitioner can discuss the available options with the director directly.
This article is general information, not legal, financial or insolvency advice, and does not cover every director's circumstances.
If you would like to talk through your options, Harbourfirst can introduce you to a regulated insolvency specialist who can look at your situation properly — start an enquiry.