Bosses’ bonuses banned in exchange for virus loans
Large firms who borrow from the UK taxpayer will be banned from paying bonuses and dividends, according to the Treasury and the Bank of England. The limit on the Coronavirus Large Business Interruption Loan Scheme has been lifted from £50m to £200m. Firms who want more than £50m will face restrictions until the loan is repaid.
The Bank of England will implement the restrictions on the scheme it runs as well as seeking a letter from firms who wish to borrow for more than a year.
It said big companies who require loans from the Bank’s Covid Corporate Financing Facility (CCFF) for a term beyond 19 May 2021 “will be expected to provide a letter addressed to HM Treasury that commits to showing restraint on the payment of dividends and other capital distributions and on senior pay”.
The Bank said: “These commitments are intended to create incentives for, and promote the ability of, businesses to repay their borrowings.”
Firms to be named
As well as limiting dividends and cash bonuses to senior management – unless they were announced before applying for the government loan – companies will be prohibited from share buybacks.
The Treasury and the Bank of England also announced that from 4 June they will publish a weekly list of the companies who have accessed the Covid Corporate Financing Facility and how much they have borrowed.
They said: “This change will make the scheme more transparent and enable participating businesses to demonstrate their access to the scheme.”
The facility is designed for larger UK businesses, classed as those that “make a material contribution to the UK economy”.
Under the Coronavirus Large Business Interruption Loan Scheme, the Treasury said that companies will be able to borrow 25% of their turnover to a limit of £200m. The bigger loans will be available from 26 May. So far, 86 loans worth £590m have been approved under the Coronavirus Large Business Interruption Loan Scheme.
The government also announced:
- 464,393 loans worth £14.18bn have been approved under the Bounce Back Loan Scheme, which allows small to medium-sized businesses to borrow up to £50,000.
- 40,564 loans worth £7.25bn have been approved through the Coronavirus Business Interruption Loan Scheme, where small to medium-sized companies can access funding up to £5m.