Your Next Steps When your Company Bank Account is Frozen

Updated: 20th February 2021

How to unfreeze your company bank account due to creditor action

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.


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