If your company’s bank account has been frozen, it’s likely the bank has seen a winding up petition advertised in the London Gazette or has found out the company is going into an insolvency procedure like a company voluntary arrangement (CVA) or administration.
Banks have to take necessary steps to prevent what is called the "disposition of assets" i.e. the bank doesn't want to see large sums of money being withdrawn as they are liable for any money taken out if the company is insolvent. Once the account is frozen, there are very limited options for company directors. You can prevent this from happening by seeking insolvency or restructuring advice as soon as financial issues arise. Get help with debt before a creditor can issue a winding up petition.
Apply for a Validation Order
A validation order can be used to gain access to the bank account. A validation order is an expensive process but it should not be necessary if the account has been frozen due to misunderstanding etc. It is really where a judge has to be persuaded that the company will not withdraw all the money as they fear insolvency. In the instance where a winding up petition has been served, they need to be persuaded that the company will be able to pay its debts or that an deal with its creditors can be done. This will mean that a draft CVA is most likely needed.
- Seek guidance from an insolvency practitioner or turnaround advisor. If the company is viable, it may be eligible to enter a company voluntary arrangement.
- If the company is no longer viable and you want to close it down, consider the creditors voluntary liquidation option.
My company has gone into a CVA and now the bank has frozen the account. Why?
This is actually very rare. The bank may have received wrong or misguided information about the company and, if this is the case, you must act quickly to rectify the problem by telling the bank to contact us or your chosen advisor. The supervisor dealing with the CVA will need to explain the situation and stress the company is still trading and needs access to funding to survive the CVA. A CVA can only go ahead if 75% of creditors (by value) have approved the proposals. Regardless of whether they approved the CVA or not, if there was a majority vote to proceed, the bank should not freeze the account.
If your company’s bank account has been frozen or you need some advice about your company, call us now on 0800 9700 539. One of our advisors can talk you through all the options available to your specific situation.
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Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading. A new 20 day moratorium for distressed businesses has also been introduced.