Are Shareholders Liable for Bounce Back Loans?

Since companies who took a Bounce Back Loan will have started repaying their loan back, many directors should be factoring repayments into forecasts. 

However, many shareholders may be worrying that if there isn’t enough funds to repay the loan, will they be held liable?

Do shareholders have to give a personal guarantee for a Bounce Back Loan?

With Bounce Back Loans (BBLs), there aren’t any personal guarantees to sign, meaning that there is no risk to personal assets if the business fails. 

There is no need for any personal guarantees by company directors, shareholders or other creditors. 

Who is liable for a Bounce Back Loan?

One of the main reasons BBLs were so popular is because there were no personal guarantees attached to them. 

They were 100% backed by the government, meaning if your business is unable to repay the loan in full, the lending bank will claim 100% of its loss through the Government. 

If the loan was used sensibly and for the economic benefit of the company, any liquidation would mean the end of debt. If your business, or a business you have shares in, is struggling with Bounce Back Loan repayments and insolvency is imminent, speak to our team for support today.

To find out more about BBLs and personal liability, read our dedicated blog. 

Can shareholders get dividends with a Bounce Back Loan?

While directors may think it is acceptable to pay dividends to their shareholders using a Bounce Back Loan, it actually violates the Companies Act 2006 – Bounce Back Loans cannot be used to pay dividends. 

If you do violate the Companies Act 2006, you could be subject to facing several consequences including:

  • A tax charge may be levied
  • Subject to an investigation
  • Being reported to the National Crime Agency

Read our blog on using a Bounce Back Loan to pay dividends to find out more.

Do shareholders have to repay a Bounce Back Loan?

A Bounce Back Loan is a loan to the company, not you as an individual, even if you are a shareholder. If the company goes into Liquidation or Administration, the loan will be written off and the company will cease to exist. This means you will not be held responsible for repaying the loan. 

The only circumstance when you could be held liable for repaying a Bounce Back Loan is if you and the director of the company didn’t use the loan for the economic benefit of the company, and instead used it for personal purposes. 

Although shareholders are typically ‘separate legal personalities’ to the company, the corporate veil can be pierced in certain circumstances, resulting in liability.