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gpreen

Bounce Back Loans and Insolvent Companies

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Did you buy a Rolex with the monies you got from the Bounce Back Loan Scheme [BBL]? Or perhaps a second-hand Porsche? If so, you are probably guilty of fraud under the terms of the Government’s BBL scheme-notwithstanding the fact that your company is maintaining the monthly repayments due to the accredited lender. This article is not looking at out-and-out fraud, but rather will seek to concentrate on the possible pitfalls that Directors may face when such loan cannot be repaid by the company which is insolvent and may well need to go into a formal insolvency procedure. Let us remind ourselves of the history and main features of the BBL scheme. The Department for Business, Energy and Industrial Strategy (DBEIS) launched the BBL scheme on 4 May 2020, offering loans of up to £50,000, or a maximum of 25% of annual turnover, to support businesses during the COVID-19 pandemic….

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Declaration of Solvency

What is a Declaration of Solvency?

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A Statutory Declaration of Solvency [the Declaration] is a key document in the liquidation process for a Members’ Voluntary Liquidation [MVL]. An MVL is a solvent liquidation procedure where, from the outset, it is envisaged that all creditors will be paid in full. Prior to the passing of the Special Resolution by the Shareholders to place the company into liquidation, both directors [if there are only 2] or a majority of directors [if there are more than 2] must declare before a solicitor the Declaration stating that the directors have made a full enquiry into the affairs of the company and are satisfied that it will be able to settle all its debts [together with Statutory Interest at 8% per annum payable to outstanding creditors] within 12 months of the commencement of the MVL. Under the Insolvency Act 1986 [the Act] it is a criminal offence for a company director…

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