Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government whether companies who take out new Government-backed loans will be banned from paying dividends and cash bonuses; and if so, when.

Under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) to ensure that loans backed by taxpayers’ money are being used in the right way to support businesses and jobs through this difficult time, loans come with restrictions on dividend payments:

• For facilities of up to £50m, dividend payments can continue but may not be increased for as long as any facility under CLBILS remains outstanding.
• For facilities of more than £50 million businesses must agree to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan. These restrictions were introduced on 26 May, when the maximum loan size under CLBILS was extended to £200 million.

For facilities of more than £50 million, until the facility has been repaid in full, borrowers and members of their group cannot:

• Make dividends or other shareholder payments that were not declared before the borrower entered the facility other than in very restricted situations.
• Pay any cash bonuses to senior management, or award any pay rises to senior management except where such pay rise was (i) agreed in writing before the facility was taken out, or (ii) is in keeping with similar payments made in the preceding 12 months, and (iii) does not have a material negative impact on the borrower’s ability to repay the facility. The restriction does not need to apply to pay awards or cash bonuses to be paid to new members of senior management joining the group after the date of the facility but must apply to any subsequent cash bonuses or pay rises awarded to such persons after they have joined the group.

Under the Future Fund, loans advanced under a Convertible Loan Agreement (CLA) cannot be used to pay dividends, pay bonuses or discretionary payments that are non-contracted or not in the ordinary course of business for 12 months, or pay advisory, placement or similar corporate finance type fees in relation to that CLA.