COMPANIES with outstanding coronavirus bounce back loans can no longer be dissolved by their directors without the possibility of an official investigation, a business adviser has warned.

Clive Fortis, of the Bournemouth office of licensed insolvency practitioner Antony Batty, said: “In the first three months of 2021, almost 40,000 companies were struck off the Companies House register, a staggering increase of 743 per cent in the first three months of 2020.

“Speculation that these figures related to avoidance of coronavirus-related loan repayments led the Department for Business, Energy and Industrial Strategy to take the unusual step, in March 2021, of making a blanket objection to any application for dissolution by any company with an unpaid bounce back loan.

“It is believed that this may have prevented the dissolution of almost 51,000 companies, with unpaid loans totalling over £1.7billion.”

He said challenges such as high energy costs, supply chain problems, staff shortages and the need to repay Covid loans could all fuel a rise in company insolvencies in the coming months – especially if the option of voluntary dissolution became unavailable.

It is normal for companies entering liquidation to face investigation by the Insolvency Service. However, from next month, new legislation means directors of voluntarily dissolved companies will face the same scrutiny and potential disqualification if their conduct makes them “unfit” to be directors.

Mr Fortis said: “The new legislation means that a company with an outstanding bounce back loan can no longer be dissolved and struck off without the possibility of an Insolvency Service investigation. This means that an insolvent limited company with an outstanding bounce back loan can only be voluntarily wound down by using a creditors’ voluntary liquidation (CVL), and not by dissolution.”

While dissolving a company is relatively straightforward, involving sending a form to Companies House, a CVL requires a licensed insolvency practitioner.