What are your options when your business bank account is frozen
If your business bank account is frozen, this can quickly cause huge problems for your company as no money can enter or leave your account. This means you cannot make payments to creditors, suppliers, or staff, meaning in many cases trade will soon grind to a halt.
When dealing with a frozen bank account, your first step is to understand why your account has been frozen before you can plot a route forward.
Why has my business bank account been frozen?
A frozen bank account is often triggered by a creditor issuing a Winding Up Petition against your company. Any creditor who is owed more than £750, can petition the court to wind up a limited company due to unpaid debts. This often leads to the bank freezing the company’s accounts to prevent the company from moving funds out of the account while the winding up petition is active.
While any creditor can serve a winding up petition against your company, this is an action commonly done by HMRC due to unpaid tax debts such as Corporation Tax.
Once a winding up petition has been issued, this is advertised in the Gazette and therefore becomes public knowledge.
Banks will regularly check the Gazette for these types of notices and will typically freeze the accounts of any company issued with a winding up petition in order to protect themselves from any further financial losses which could be incurred if the company is allowed unrestricted access to its bank account.
Understanding validation orders for frozen bank accounts
In many instances, a winding up petition will lead to the compulsory liquidation of the company in question and the need for the company to cease trading immediately. When this is the case, the fact the company’s bank account has been frozen doesn’t make a difference to the eventual outcome.
In some instances, however, a company is able to turn the situation around though the implementation of a formal insolvency process.
In these circumstances, the company can apply to the court for a validation order. This is often done when the company is in the process of presenting a Company Voluntary Arrangement (CVA) proposal to creditors. This is a formal insolvency process which acts as a legally binding payment plan entered into by an insolvent company and its creditors. A CVA can only be proposed under the guidance of a licensed insolvency practitioner who has deemed the company to be viable as a trading entity going forwards.
What should I do if my bank accounts have been frozen?
If you company’s bank accounts have been frozen, you should take this as a major warning sign that your business is on the brink of insolvency. As the director of an insolvent company, you have a legal duty to prioritise the interests of your creditors above those of your own and your fellow directors.
By seeking the advice of a licensed insolvency practitioner once you become aware your company is insolvent, you are demonstrating your desire to adhere to these legal responsibilities.
If your company has had its bank account frozen, has received a winding up petition, or is dealing with unmanageable debt problems, contact the experts at Scotland Liquidators. Our team of licensed insolvency practitioners are here to give you the help and advice you need during this time.
