When a business believes that another party may move or hide assets to avoid paying a debt, urgent legal action may sometimes be required.
In certain circumstances the courts in England & Wales can grant what is known as a freezing order. This is a court injunction that prevents a person or company from dealing with their assets while a legal claim is ongoing.
Freezing orders are powerful legal tools and are commonly used in serious commercial disputes, fraud claims and asset recovery cases. However, they are only granted where strict legal criteria are satisfied.
Understanding how these orders work can help businesses decide whether this type of urgent action may be appropriate.
What is a freezing order?
A freezing order is a court order that restricts a defendant from disposing of or moving their assets.
This often includes bank accounts, investments, property or other financial assets. The order does not transfer ownership of those assets to the claimant, but it prevents the defendant from moving or hiding them before the dispute is resolved.
The purpose of the order is to preserve assets so that, if the claimant ultimately wins the case, there will still be assets available to satisfy the judgment.
When will the court grant a freezing order?
Courts treat freezing order applications very seriously because of their significant impact on the defendant.
To obtain one, the applicant must usually show that they have a strong legal case and that there is a genuine risk the defendant may dissipate assets before the claim is resolved.
Evidence might include unusual financial activity, attempts to move money offshore or previous conduct suggesting that assets may be hidden.
The court will carefully examine the evidence before deciding whether such a restrictive order is justified.
Are freezing orders granted quickly?
In urgent situations they can be.
Applications for freezing orders are often made without giving advance notice to the defendant. This prevents the defendant from moving assets before the order is granted.
Because of the seriousness of these applications, the court requires detailed evidence and strict compliance with procedural rules.
Businesses considering this type of action should usually seek legal advice quickly, as timing can be critical.
Are there risks in applying for a freezing order?
Yes.
Applicants must provide undertakings to the court, including a promise to compensate the defendant if it later turns out that the order should not have been granted.
For that reason, freezing orders are normally used only in cases where the evidence is strong and the financial risk is significant.
Taking early advice helps businesses determine whether this type of urgent remedy is appropriate.
