My company bank account has been frozen: What should I do now?

Why is my bank account frozen and how can I access it?

There are several reasons why your company bank account might be frozen, the most common is that you’ve been issued with a Winding Up Petition by a creditor.

If your company doesn't have a functioning bank account, it becomes almost impossible to trade. The good news is there are a few ways to resolve this very serious situation, but you need to act fast.

Why has my company bank account been frozen?

The most common reason for a bank to freeze your company account is that a Winding Up Petition has been issued against your business; this may be by HMRC or another creditor. A Winding Up Petition is a formal demand for payment that can force the company into compulsory liquidation if you ignore it. 

After seven days of the petition being served against your company, it will be advertised in The Gazette and become public knowledge. Banks regularly check The Gazette and will usually react to news of a Winding Up Petition by freezing your company’s bank account to prevent any further transactions. 

Banks take this approach to prevent you from withdrawing money from the account, as the bank could potentially become liable for this money if the company enters liquidation. Freezing your account can also prevent you from receiving money into your account. 

A Winding Up Petition is not the only reason a bank might freeze your account. Other less common reasons include:

• A creditor has made a freezing order against you
• You have breached your credit agreement with your bank
• Your company has entered into an insolvency procedure, such as voluntary liquidation

What are the potential consequences of a frozen bank account?

A frozen bank account makes it all but impossible to trade. You won’t be able to access money to pay staff and suppliers, nor will you be able to receive money from clients and customers. It can also cause the company to default on its financial obligations - such as debt repayments - which will harm your company's credit rating and reduce your ability to access affordable credit in the future. 

If the cause of the frozen bank account is a Winding Up Petition, the lack of access to company funds ironically makes it difficult for you to challenge the petition or else pay the money you owe. Even if the company is otherwise viable, a frozen bank account can be enough to send the company into liquidation. 

Without being able to defend the Winding Up Petition, the court will make a Winding Up Order and your company will be forced into Compulsory Liquidation. The liquidator will sell the company’s assets for the benefit of its creditors and your business will cease to exist as a legal entity.

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What can you do if the bank freezes your company account?

Although you have limited options, there are still a few potential solutions available:

• Pay the Winding Up Petition using your personal funds
• Apply for a Validation Order to allow certain transactions into and out of your bank account  
• Negotiate a formal repayment agreement known as a Company Voluntary Arrangement (CVA) with your creditors
• Close the company voluntarily using a Creditors’ Voluntary Liquidation (CVL)

Pay the Winding Up Petition

You can use your personal funds to repay the creditor who issued the Winding Up Petition. In this case, as long as no other supporting creditors have joined the petition, it will be dismissed. However, this is unlikely to be viable for larger amounts which you do not have the ability to repay. 

Apply for a Validation Order

A Validation Order is a court order that allows certain transactions to go ahead so you can repay the petitioning creditor. It will only be granted in exceptional circumstances, such as where it can be proved that the company is solvent or where you are drawing up a Company Voluntary Arrangement (CVA) with an insolvency practitioner. A Validation Order will only be granted if it is in the best interests of the company and its creditors as a whole.

The issue here is that obtaining a Validation Order is a costly process in itself, as a legal professional will have to present your case to the court. That makes it unsuitable for many companies that cannot access their accounts and may already be struggling with their cash flow.

Negotiate a formal repayment agreement

If the company is viable, you can appoint an insolvency practitioner to negotiate a Company Voluntary Arrangement (CVA) with creditors on your behalf. If your creditors accept your proposal, the Winding Up Petition will be dismissed and your bank account will be unfrozen. You can then repay what you owe in monthly instalments over a typical period of three to five years. 

The risk is that when a creditor has had to resort to issuing a Winding Up Petition, they may not be confident in your ability to stick to the terms of the CVA and may therefore vote against its implementation. 

Close the company voluntarily 

If the company is no longer viable and there’s no realistic prospect of a recovery, you could choose to liquidate the company voluntarily using a Creditors’ Voluntary Liquidation. 

It will bring an end to the business and reduce the risk of adverse consequences for you personally when compared to being liquidated compulsorily by the court. The company's assets will be sold for the benefit of your creditors and it will be struck off the Companies House register and will cease to exist as a legal entity. All remaining debts will be written off, except any which have been personally guaranteed.

My company bank account has been frozen - I need help

Time is of the essence when a bank account has been frozen, so seek help immediately. At UK Liquidators, our insolvency practitioners will discuss your situation with you and help you understand the options available. Call our expert team for immediate advice or arrange a free, no-obligation consultation at one of our network of 100+ offices throughout the UK.