You should not use voluntary strike off to escape an outstanding Bounce Back Loan. A UK company may eventually be dissolved after dealing properly with its Bounce Back Loan, but simply submitting a DS01 application while the loan remains unpaid can create serious problems. A Bounce Back Loan was a debt owed by the company to its lender. The government guarantee protected the lender against eligible losses; it did not turn the company's borrowing into a grant or cancel the company's obligation to repay it.

The Insolvency Service is particularly clear on this point: Bounce Back Loans must be repaid, and it can investigate an unpaid Bounce Back Loan even after the company has been dissolved. It also identifies dissolving a company to avoid repaying the loan as potential misconduct. That makes the answer more nuanced than simply asking whether Companies House will allow a company to file a strike-off application. The real question is whether the company is solvent, eligible for voluntary strike off and has dealt properly with the outstanding loan and its other creditors.

Can You Dissolve a Company That Still Owes a Bounce Back Loan?

In practical terms, an outstanding Bounce Back Loan should be dealt with before a company is voluntarily dissolved. A company with an unpaid loan is not automatically insolvent. For example, a company might owe £10,000 on its Bounce Back Loan but have £30,000 in cash and no other significant liabilities. It may be capable of repaying the loan in full. That is very different from a company with:

• £25,000 remaining on its Bounce Back Loan
• £3,000 in the bank
• unpaid Corporation Tax
• supplier debts
• no realistic future income

The second company may be insolvent, meaning voluntary strike off is unlikely to be the appropriate way to close it. The government's Bounce Back Loan guidance specifically warns that dissolving a company to avoid repayment can constitute misconduct.

What Is a Bounce Back Loan?

The Bounce Back Loan Scheme (BBLS) was introduced during the COVID-19 pandemic to provide government-backed finance to eligible UK businesses. Businesses could borrow between £2,000 and £50,000, with the government providing a guarantee to participating lenders. The loans were intended to support businesses affected by the pandemic and were repayable over the applicable loan term. The important point for company owners is that the government guarantee was not a guarantee to the borrower.

The company remained responsible for its debt. If the company defaulted, the lender could potentially make a claim under the government guarantee. But that did not automatically extinguish the borrower's underlying liability. The government's current data publication specifically states that borrowers remain liable for repaying their Bounce Back Loan debt before and after a lender claims under the government guarantee. So: Government-backed does not mean government-forgiven.

Does the Government Guarantee Mean You Can Close the Company Without Paying?

No. This is one of the most persistent misunderstandings about Bounce Back Loans. The government guarantee was primarily designed to protect participating lenders against qualifying losses. It was not intended to give company directors a personal escape route or allow companies to borrow money and then dissolve without consequence.

The Insolvency Service's guidance states that Bounce Back Loans must be repaid and that companies can be investigated even after dissolution if the money has not been repaid. The distinction is especially important where a director deliberately attempts to use dissolution as a way of avoiding repayment.

What Happens If You Apply for Strike Off With an Unpaid Bounce Back Loan?

A voluntary strike-off application is not automatically equivalent to a successful dissolution. After an eligible company applies for voluntary strike off, the proposed dissolution is advertised in The Gazette. Interested parties can object. A lender with an outstanding Bounce Back Loan can potentially object because the company has an unresolved creditor liability. Even if the company eventually disappears from the register, that does not mean the history surrounding the Bounce Back Loan has disappeared. The Insolvency Service has explicitly stated that it can investigate Bounce Back Loan issues after a company has been dissolved.

This is particularly important because government data shows that substantial numbers of companies holding Bounce Back Loans have already been dissolved or entered insolvent liquidation. As of 31 March 2025, government data identified 50,935 dissolved companies and 57,929 companies in creditors' voluntary liquidation that had drawn Bounce Back Loan facilities. The same data showed that 73,977 facilities across dissolved and insolvent-liquidation companies were recorded as defaulted. Dissolution, therefore, does not make the Bounce Back Loan invisible.

Can a Solvent Company Close With a Bounce Back Loan?

The answer depends on what happens to the loan before closure. Consider a company that has:

• £40,000 in cash
• £12,000 remaining on its Bounce Back Loan
• no other material liabilities
• stopped trading permanently

The company may be solvent. In that situation, the sensible approach is to settle the Bounce Back Loan and deal with all remaining company affairs before proceeding with voluntary strike off. The fact that the company once received government-backed COVID support does not prevent a solvent business from eventually closing. The problem arises when the company cannot meet its liabilities.

What If the Company Cannot Repay the Bounce Back Loan?

If the company cannot repay the Bounce Back Loan and its other debts as they fall due, the directors need to consider whether the company is insolvent. Insolvency is not determined solely by the existence of a Bounce Back Loan.

A company can have substantial borrowing and still be solvent if it has sufficient assets and cash flow to meet its obligations. Conversely, a company with a relatively modest loan can be insolvent if it has no realistic means of paying it. Two common tests are particularly relevant:

Cash-flow insolvency

The company cannot pay its debts when they become due.

Balance-sheet insolvency

The company's liabilities exceed the value of its assets, subject to the applicable legal assessment. If the company is insolvent, directors should not treat voluntary strike off as a cheaper version of liquidation. Formal insolvency procedures may need to be considered, including a Creditors' Voluntary Liquidation (CVL), depending on the circumstances.

Why Bounce Back Loans Receive Particular Scrutiny

Bounce Back Loans were issued through a government-backed scheme that relied heavily on borrower self-certification and simplified lending processes. That made the scheme vulnerable to abuse. The Insolvency Service continues to investigate cases involving:

• overstated turnover
• loans obtained by businesses that were not eligible
• loans obtained by companies that had already ceased trading
• personal use of loan funds
• misuse of company money
• attempts to dissolve companies to avoid repayment

The consequences can include director disqualification, compensation orders, company winding-up and, in serious cases, criminal proceedings. Recent enforcement demonstrates that these investigations are not merely historical. For example, in 2025 the Insolvency Service reported a case in which a director overstated his company's turnover to obtain a £50,000 Bounce Back Loan when the company was entitled to considerably less. He was disqualified as a director for 11 years and ordered to repay money he was not entitled to, together with interest and costs.

In 2026, another director received the maximum 15-year director disqualification after obtaining £46,500 for a company that had never traded and was therefore not entitled to the loan. The lesson is important: an unpaid Bounce Back Loan is one issue; misconduct connected with the loan is a much more serious issue.

What If the Bounce Back Loan Was Used Properly?

If the loan was legitimately obtained and used for the economic benefit of the business, an outstanding balance does not by itself mean the director has done anything wrong. For example, a restaurant might have borrowed £30,000 during the pandemic and used the money for legitimate business costs. If the business later failed and £12,000 remains outstanding, the existence of that debt does not automatically mean the director is personally liable for £12,000. The company and the director are separate legal persons. The important questions become:

1. Was the loan obtained properly?
2. Was the money used for the company's economic benefit?
3. Can the company repay the outstanding balance?
4. Is the company solvent?
5. Are creditors being treated properly?
6. Is the proposed closure being carried out for a legitimate reason rather than to evade the debt?

These questions matter considerably more than simply whether a DS01 form has been submitted.

Are Directors Personally Liable for an Outstanding Bounce Back Loan?

Not automatically. One of the distinctive features of the Bounce Back Loan Scheme was that the government-backed structure generally did not require a personal guarantee from the director for the standard Bounce Back Loan facility. That does not mean directors can never face personal financial consequences. Personal liability can potentially arise from other circumstances, including:

• fraudulent or dishonest conduct
• misuse of Bounce Back Loan funds
• providing false information
• wrongful or other misconduct in an insolvency situation
• transactions that improperly prejudice creditors
• separate personal guarantees or contractual obligations

The Insolvency Service specifically states that where misconduct is identified in relation to a Bounce Back Loan, a court can order a director to pay compensation to creditors and the director can be disqualified. Therefore, limited liability is not a licence to misuse company money or deliberately dissolve a company to avoid its obligations.

Can a Creditor Restore a Company After Dissolution?

Yes, potentially. Dissolution ends a company's legal existence, but it does not necessarily prevent a creditor from seeking a remedy. Where a creditor needs to pursue a dissolved company, restoration to the Companies House register can be relevant. The restoration process can effectively bring the company back into existence for legal purposes.

This is one reason why directors should not think of dissolution as a permanent shield against creditors. For a Bounce Back Loan lender, the exact recovery route will depend on the circumstances and the company's status, but the important principle is that dissolution does not guarantee that an unpaid loan disappears.

What Happens If the Company Has Other Debts as Well?

Bounce Back Loans are often only one part of a failed company's balance sheet. A company might simultaneously owe:

• HMRC
• suppliers
• employees
• landlords
• lenders
• contractors
• utility providers
• professional advisers

Directors should assess the entire creditor position rather than focusing solely on the Bounce Back Loan. This becomes particularly important when deciding whether to make payments before closure.

For an insolvent company, paying the director, a connected company or one favoured creditor while leaving other creditors unpaid can potentially create issues. Transactions and payments made before insolvency can be examined during an insolvency process.

The right question is not: "How can I clear the Bounce Back Loan problem before closing?" It is: "What is the company's complete financial position, and what is the legally appropriate way to deal with all creditors?"

What Should You Do Before Closing a Company With a Bounce Back Loan?

A sensible closure process starts with a complete financial review.

1. Confirm the outstanding loan balance

Obtain an up-to-date statement from the lender showing the principal, interest and any arrears.

2. Review how the loan was obtained

Check the original application and supporting information. Make sure the turnover declaration and other information were accurate.

3. Review how the funds were used

The Bounce Back Loan was intended for the economic benefit of the business and was not permitted to be used for personal purposes.

4. List every creditor

Include HMRC, suppliers, employees, lenders and any other outstanding liabilities.

5. Identify company assets

Cash, vehicles, equipment, stock, intellectual property and other assets need to be accounted for before closure.

6. Assess solvency

Determine whether the company can pay its debts when they fall due and whether there are wider balance-sheet concerns.

7. Do not transfer company money or assets improperly

Particularly where the company is insolvent, directors should be cautious about extracting money or transferring assets to themselves or connected parties.

8. Choose the correct closure route

A solvent company that has settled its liabilities may potentially use voluntary strike off if it satisfies the eligibility conditions. An insolvent company may need a formal insolvency procedure instead.

9. Keep evidence

Retain loan statements, accounts, bank records, tax records and evidence showing how the Bounce Back Loan was used. This can be valuable if questions arise later.

What If You Cannot Afford to Repay the Bounce Back Loan?

If the company genuinely cannot afford to repay the remaining loan, do not simply abandon the company or submit DS01 without understanding the consequences. The company may need to enter a formal insolvency process. A licensed insolvency practitioner can assess the company's assets, liabilities, cash flow and creditor position and explain the available options. For a small company with no assets and a substantial outstanding Bounce Back Loan, a CVL may be appropriate. In another case, administration or a different restructuring solution might be more suitable.

The correct route depends on the facts. The most important point is that financial difficulty is not itself misconduct. Businesses can fail legitimately. The risk increases when directors deliberately conceal assets, misuse funds, favour themselves or attempt to dissolve the company specifically to avoid a government-backed loan.

What Does This Mean for Overseas Founders?

For non-resident directors and international founders, the same rules apply. Living outside the UK does not prevent a UK company from having a Bounce Back Loan liability, and moving abroad does not remove the company's obligations. This matters for founders who created UK companies during the pandemic and later stopped trading. A company may appear inactive while still having:

• an outstanding Bounce Back Loan
• bank accounts
• tax obligations
• creditor claims
• assets
• unpaid professional fees

The closure decision should therefore be based on the company's actual financial position, not simply the fact that the business is no longer operating. IncorpUK, a UK company formation and management platform for global founders, is part of an ecosystem where understanding the full lifecycle of a company from incorporation through closure, is particularly important for entrepreneurs operating internationally.

Frequently Asked Questions

Can I dissolve a UK company with an unpaid Bounce Back Loan?

You should not use voluntary strike off simply to avoid repaying the loan. Bounce Back Loans remain debts owed by the borrower, and the Insolvency Service can investigate unpaid loans even after a company has been dissolved.

Does a Bounce Back Loan have to be repaid?

Yes. The government guarantee does not turn the loan into a grant. Government guidance states that Bounce Back Loans must be repaid, and borrowers remain liable for their debt even after a lender claims under the government guarantee.

Can HMRC or a bank object to my company's strike off?

A creditor can object to a proposed strike off where there is a legitimate outstanding debt. An unresolved Bounce Back Loan can therefore create an obstacle to voluntary dissolution.

Does dissolving my company cancel the Bounce Back Loan?

No. Dissolution does not automatically cancel the company's underlying debt. The Insolvency Service can investigate Bounce Back Loan issues even after dissolution.

Can I be personally liable for my company's Bounce Back Loan?

Not automatically merely because you are a director. However, personal liability or compensation consequences can arise where there has been misconduct, fraud or other circumstances creating personal exposure.

What if I used the Bounce Back Loan for legitimate business expenses but the company later failed?

A genuine business failure is not the same as Bounce Back Loan fraud. If the loan was legitimately obtained and used for the company's economic benefit, the remaining debt should be dealt with through the company's creditors and, where necessary, the appropriate insolvency process.

Can the Insolvency Service investigate a dissolved company?

Yes. The government's Bounce Back Loan fact sheet expressly states that a company may be investigated over an unpaid Bounce Back Loan even after it has been dissolved.

What if I cannot afford to repay the loan?

If the company cannot pay its debts, obtain appropriate insolvency advice rather than treating voluntary strike off as a solution. A formal insolvency process may be more appropriate.

Can a company dissolve after fully repaying its Bounce Back Loan?

Yes. Once the loan has been properly repaid, it becomes one less creditor issue to resolve. The company must still satisfy the other requirements for voluntary strike off and deal with its remaining tax, creditor and asset matters.

Conclusion

A Bounce Back Loan does not prevent a UK company from ever being closed, but an outstanding loan should not simply be left behind through voluntary strike off. The government guarantee was designed to protect lenders, it did not erase the company's repayment obligation. If the company can afford to repay its Bounce Back Loan, the cleanest approach is to settle it and deal with the rest of the company's affairs before applying for strike off. If the company cannot afford to repay the loan, the issue may be insolvency rather than ordinary company closure. Directors should then consider the interests of all creditors and obtain appropriate professional advice.

Most importantly, do not confuse company failure with misconduct. A business can legitimately fail. What creates serious risk is using the Bounce Back Loan for personal purposes, providing false information, moving company assets improperly or deliberately dissolving the company to avoid repayment. For founders, the safest principle is simple: If your company still owes money, resolve the debt or follow the correct insolvency process before attempting to dissolve the company.