Liverpool lawyer in Bounce Back loans warning

Directors may still have to repay Government Bounce Back loans even if their business collapses, a Liverpool lawyer is warning. Tony McDonough reports

Donal Bannon
Donal Bannon, commercial partner at Morecrofts Solicitors


Liverpool lawyer Donal Bannon says “naïve” business owners who think they can walk away from Government Bounce Back loans if their business fails need to think again.

It is estimated more than £45bn of loans have been handed out by the Government to businesses since 2020. The aim of the loan scheme was to help firms ‘bounce back’ from the economic impact of the COVID pandemic.

However, businesses have emerged from COVID only to find themselves in the midst of a cost-of-living crisis and a sharp economic downturn.

At the same time the Government has been under significant political pressures to recover monies lost via fraudulent claims. The National Audit Office has described Bounce Back as the Government’s “largest and most risky” support scheme.

Mr Bannon, a commercial partner at Morecrofts Solicitors in Liverpool, says he has met entrepreneurs who are “dangerously unaware” of their payback obligations even in the event of a business failure.

“The Government spent hundreds of millions funding Bounce Back loans, and the clue is in the name – loan,” he explained. “They will be fully expecting businesses to repay their debts.

“Simply because a business is declared insolvent, it would be naïve to believe the loan commitment disappears if the monies were not used for the company’s benefit.

“It might be possible to negotiate with the lender to repay a Bounce Back Loan over a longer period and take a payment holiday, but it will not be written off.”

Mr Bannon said business owners can remain liable to make repayments following insolvency and even dissolution.

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The Insolvency Service will still attempt to recover unpaid monies if it can prove misconduct. This can include providing false information on the loan application, or the loan being used for personal benefit rather than to help the business or by dissolving your company to avoid repaying the loan.

In that event, a director may end up being disqualified from being a director of other companies and may have to compensate the company.

Insolvencies are expected to rise in 2023, according to recent data from the Insolvency Service. Mr Bannon added: “Unfortunately, the number of businesses facing difficulties next year is likely to grow.

“I regularly meet business owners who are dangerously unaware of what might happen next. They should seek professional advice and look at every potential eventuality before taking steps towards closing their business.”

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