Member of BTG Global Advisory

Your Next Steps When your Company Bank Account is Frozen

If pressure from your creditors has resulted in a winding up petition being issued, your options as a director are severely limited. It renders the company unable to trade without going through the courts to allow certain transactions – a costly and complex process.

There may be an opportunity to resume negotiations if your creditor is open to discussions with a professional. Regardless of whether this option is available, however, you will need to seek the services of an Insolvency Practitioner (IP).

The obvious question is how do you access the money needed to pay an IP when company funds are frozen? Some directors use personal monies or sell their own assets to fund it, but this generally only happens if they think the business is viable.

Begbies Traynor is available for a same-day consultation, free of charge, to discuss your company’s position and options.

Why has your bank account been frozen?

It is usually the result of aggressive action by a disillusioned creditor. If they petition to wind up your company, it will be advertised in The Gazette after seven days. This makes it available for public view, and forewarns your bank that the company is experiencing deep financial problems.

You may not agree with them – in fact, it could be the case that you simply need more time to pay, but freezing the company bank account signals the end for many businesses, regardless of their underlying viability.

It is a dire situation for company directors who believe their business could return to profitability in due course, but at this stage it often means they have left it too late to act.

So what choices do you have?

Several choices remain, even after your company bank accounts have been frozen:

  • Applying for a Validation Order to allow certain transactions through the bank account
  • Allowing your Insolvency Practitioner to negotiate for a Company Voluntary Arrangement
  • Placing the company into voluntary liquidation if you feel that it has no future

What is a Validation Order?

This is an order that allows certain transactions through your company bank account. The reason why banks freeze company accounts is that they become liable for transactions that go through your account in insolvency, so they generally act quickly to minimise their own risk.

To obtain a Validation Order, an IP will need to provide advice, write a report and then submit it to court, as well as notifying your creditor. Validation Orders do not allow all transactions through, and each time you want further transactions validated you have to go through the same process, which can be costly and complicated, all at a time when you have no access to funds.

Could a Company Voluntary Arrangement be a better option?

Potentially yes, but the reason why a winding-up petition has been issued is probably an inability to reach agreement with your creditor. The presence of a licensed Insolvency Practitioner in the process may help the situation by potentially swaying the creditor’s judgement on your ability to make payments.

A Company Voluntary Arrangement is one solution that might work if your IP believes that the company is viable. It would involve making a single payment each month, which might be more than your creditor would receive if the company was liquidated.

As long as you adhere to the terms of the CVA, any legal action against your company is stayed and interest and charges are frozen. Unfortunately though, if you have delayed taking action to resolve this debt, negotiations are already at a disadvantage.

Another factor to consider is whether you might face accusations of ‘unfit conduct’ as a company director. If you traded while insolvent, you could be held personally liable for some or all of the company’s debts, as well as facing disqualification and other fines/penalties.

Voluntary Liquidation

If you think there is no future for the company, and fear allegations of improper conduct as a director, the best solution may be to enter voluntary liquidation. This would result in the closure of the company following sale of the assets to repay creditors.

By voluntarily placing the company into liquidation, the chances of having serious allegations made against you may also be minimised.

Begbies Traynor is the UK’s market leader in corporate recovery. We are licensed to act as Insolvency Practitioners and operate from an extensive UK office network.

Contact our team

Latest News
York taxi company placed into administration
York taxi company placed into administration
On 25th November 2016, Rob Sadler and Dave Broadbent of Begbies Traynor in York were appointed as joint administrators of Six Five Nine Cars Ltd. The business, which has traded in York for over 15 yea…
40 jobs saved as gaming retailer sold out of administration
40 jobs saved as gaming retailer sold out of administration
Administrators of a South West-based gaming retailer have succeeded in saving 40 jobs at the company after securing the sale of the business, including 12 out of 15 of its High Street stores. Business…
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Nearly 100 jobs saved as bars and restaurants are sold out of administration
Almost 100 jobs have been saved by the successful sale out of administration of a number of Midlands bars and restaurants. Town and Country Inns plc appointed business recovery and rescue specialists …
Begbies Traynor opens new office in Taunton
Begbies Traynor opens new office in Taunton
The UK's leading independent business recovery practice, Begbies Traynor, has opened an office in Taunton.  The move will enable the firm to build on work it has already done in the town and with the…
Brexit uncertainty puts the brake on London businesses
Brexit uncertainty puts the brake on London businesses
New research reveals that British businesses from Land's End to John o' Groats have shown surprising resilience since the EU Referendum result was announced, with levels of financial distress falling…
UK businesses remain resilient in the face of Brexit
UK businesses remain resilient in the face of Brexit
UK businesses across nearly every sector of the economy were showing positive signs of stability following the EU Referendum, new research from Begbies Traynor, the UK’s leading independent insolven…

Advice You Can Trust

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland