A Guide to Frozen Bank Accounts

Our expert team can help fix any frozen bank account situation

A frozen company bank account can be a scary situation for any director or business owner. Unless it is dealt with quickly it can lead to a rapid end to the company’s ability to trade. Our expert team has helped numerous businesses with frozen bank accounts, and allowed them to keep trading.

Whether it is a winding up petition you face, HMRC issues or a full freezing injunction, we have the team of experts to help today. Let us take the stress out of the situation and help you keep on trading. PICK UP THE PHONE FOR A FREE CONSULTATION TODAY.

A guide to frozen bank accounts

Set out below is a quick guide to some of the key issues concerning frozen bank accounts

What is a frozen bank account?

A frozen bank account can have a massive impact on your ability to run your company. Company bank accounts are normally frozen after service of a winding up petition on the company. As soon as a bank finds out that a winding up petition has been issued, it can freeze the bank account and the words “limited company bank account frozen” and “frozen bank account” are phrases we often hear from our clients.

Unfreeze your bank account and reverse a winding up order

However, it is possible for a winding up order to be reversed and the bank account to be unfrozen.

We are experts in frozen bank accounts and the best way of doing this, if a winding up petition has been issued, is to apply for a validation order. A validation order validates or permits certain payments to be made from a frozen bank account.

These could include

• payments to staff
• payments to help secure the finalisation of a contract
• payments to a landlord for rent.

The court will give permission to certain transactions to help the business continue to trade subject to certain evidence being put forward to the court as part of the application.

This is the best way of unfreezing a company bank account and ensuring that you can continue trading despite a winding up order being made against the company. Prompt action is required. If a company has a frozen bank account, it can soon become critical to the survival prospects of a company.

Reasons for a Frozen Bank Account

When discussing frozen bank accounts, we must first ask “Why would a business bank account be frozen?”

In our experience at Francis Wilks & Jones, normally it relates to one of two particular reasons: 

1. A winding up petition has been issued

The first reason is that a winding up petition or winding up order may have been issued against the company in respect of a debt recovery claim.

This can either be by a creditor or a HMRC winding up order.

• if this happens, then it will soon come to the attention of the company’s bank and the bank will then take the immediate step of putting a freeze on the bank account;
• this is because the bank does not want to be held liable for any payments being made out of the account after the winding up petition came to their attention. 

If this does happen and your business bank account is frozen there are steps that can be taken to unfreeze the business bank account. These normally relate to making an application to court for a validation order pursuant to paragraph 9.11 of the practice direction relating to Insolvency Proceedings. When it comes to the question “how long does it take to unfreeze a bank account?” that can depend on many factors, so we would naturally suggest speaking to us, so we can help guide you through the process.

2. A freezing order or freezing injunction has been issued

These are much more serious situations as the courts rarely grant freezing orders.

The court only grants freezing orders where allegations of wrongdoing or dishonesty have been made against the company. And a belief that the company is about to dispose of its assets or make itself judgment proof.

In those circumstances, the court might can make a freezing order. If one is granted it is normally with no notice to the company but one of the service provisions relating to the freezing order is that the applicant must then serve it on the company’s bank.

• once a bank receives the freezing order it tends to simply freeze the entire bank account even though it is technically not supposed to do this;
• in these circumstances Francis Wilks & Jones can help you unfreeze the account so that you can continue to trade;
• a freezing order should never be used to stop a company trading and there are strict provisions relating to this.

Payments in and out of the business in the ordinary course of trade are permitted although the bank tends to take a “one size fits all” approach and freeze the account. If you find yourself with a frozen bank account, we can help you not only with the freezing order side of things but also looking to get the bank account unfrozen quickly. We have the right contacts in various banks and can speak to their legal team and explain why the account should be unfrozen.

3. The banks suspects Money Laundering or other offences have been committed

This is more unusual and is not connected to a creditor winding up petition. If the bank suspects money laundering offences have been committed, they have a duty to freeze the account and report the issues to the National Crime Agency (NCA) by filing what is known as a Suspicious Activity Report (or SAR).

• Once that has been notified, the account is frozen for a period of time as the bank itself does not want to find itself in trouble for the offence of “tipping off”. Because of this it will not notify you that it has applied for a Suspicious Activity Report .
• Unfortunately the National Crime Agency can take time to respond to the bank. However, if they don’t respond to the bank within 7 days – the bank can unfreeze the account free from any criticism.
• However, if the National Crime Agency does respond to the bank within 7 days that it wants to carry out further investigation, then the total period it can have to investigate is 42 days (unless a further police order is obtained). During this time the account will remain frozen but you wont be told why.

This area of the law if complex, but even so, action still can be taken to remedy the frozen bank account.

4. Account Freezing Orders

Under the terms of the Proceeds of Crime Act 2002 (as amended by the Criminal Finance Act 2017), bank and building society bank accounts can be frozen for a period of up to 2 years to allow an investigation to take place. Account Freezing Orders are an increasingly common way in which investigative authorities target cash help in bank accounts – if they think it is used for unlawful conduct. This type of business crime is complex and our resident expert Andy Lynch (ex HMRC) is the best person to call on this.

Can HMRC freeze a bank account?

In short, the answer is: Yes – HMRC can freeze a bank account.

However, it is probably a misconception that HMRC regularly freeze bank accounts although there is very much a justifiable reason why people think that they do.

1. HMRC Freezing Orders and freezing injunctions

HM Revenue and Customs (HMRC) are responsible for the administration of tax laws and the collection of taxes in the United Kingdom, they are also responsible for the supervision of Anti Money Laundering Regulations, this includes the supervision of Money Services Business (MSB).

There are different reasons why HMRC will use a freezing order

• In some cases, HMRC need to take steps to freeze bank accounts to protect taxpayers’ interests. This is an  order issued by the court that prevents an individual or business from disposing of assets or transferring them out of the UK. The purpose of such an order is to protect the assets before HMRC has a chance to recover any tax that may be owed.
• HMRC freezing orders can also be obtained where HMRC suspect that the proceeds of crime are being processed through regulated or unregulated MSB’s. They can also be granted against individuals using such institutions  and can be applied for with or without notice to the subject of the order.

There are two types of orders that can be issued,

• a domestic order which is restricted to UK assets: or
• a Worldwide order which covers assets in any jurisdiction globally.

Freezing orders can have a significant impact on an individual and business, as when an order is issued, the individual or business will not be able to dispose of any assets covered by the order, this includes money held in bank accounts or property. In some cases, subject of the order may not even be able to access their assets to pay for living expenses or other essential costs.

If you have been served with an HMRC Freezing Order – do contact us.

These orders are a  powerful tool for HMRC, but it is important that they are used appropriately. The court will only grant an order if it is satisfied that there are good grounds for doing so and that the order is necessary to protect HMRC’s interests, however the court also has to take into account the impact that the order will have on the individual or business concerned.

If HMRC have issued a freezing order against you, you have the ability to challenge it by making an application to the issuing court, however very often this is not necessary as if you can persuade HMRC that they were wrong or hasty in applying for the order then they will withdraw it.  It is vital that you seek specialist legal advice at the outset, to ensure that you have access to sufficient funds to live on and to help you persuade HMRC that they should unfreeze your accounts. Whilst these are more unusual remedies, they are part of the armoury of HMRC and they will use them as appropriate

Our expert HMRC disputes team at FWJ, which includes specialist lawyers, qualified accountants and a former HMRC investigator, can help you with any HMRC issues and put you on the right track. Call us today.

2. HMRC Winding up petition frozen bank accounts

HMRC quite regularly issues winding up petitions or winding up orders when a company fails to pay its taxes. This can relate to winding up petitions or winding up orders for unpaid HMRC VAT, PAYE or NIC. Once the winding up petition has been issued, it then gets served on the company itself.

However, quite quickly the existence of the winding up petition will become known to third parties and as soon as the company’s bank is aware, it will place a freeze on the company bank account.

• The reason why the bank freezes the account is that once the bank is on notice of a winding up petition, there is a danger the bank could be liable for any payments that are made out of the bank account to third parties, suppliers or any other creditors.
• Freezing a company’s bank account is necessary to protect the interest of the company’s creditors (particularly unsecured creditors). Banks effectively act as agent for the company and it is therefore unlikely that a bank would be liable for such payments if it has frozen the account.
• The bank is therefore keen to avoid any exposure and as such, will put in place a bank account freeze unless it receives a court order permitting payments to be made.
• Therefore, the HMRC winding up petition will inadvertently lead to a bank account freeze although this might not have been the original intention of HMRC.

The way to solve this problem is through a validation order application to court. It allows certain payments to be made without threat of further sanction. And this can be combined with an application to have the winding up order reversed.

At Francis Wilks & Jones we also have a former HMRC expert to call upon. Andy Lynch spent 18 years working at HMRC before moving out to assist business owners and directors who themselves might be facing HMRC related problems. He has excellent relationships with HMRC which can hugely help when dealing with a HMRC winding up order.

Consequences of a frozen bank account

There are many consequences of a frozen bank account, none of which are good for a company or business. These include

• Inability to pay key suppliers, staff or other business critical parties such as HMRC or other funders to the business
• Adverse publicity. A frozen bank account often becomes known if a winding up petition is advertised in the London Gazette. This can quickly spell disaster for a business unless urgent action is taken to get the winding up petition reversed and / or the company bank account unfrozen.
• Inability to win new business. A frozen bank account can stop the normal trading of a company and effect the normal process of winning business.
• Taking up huge amounts of management time. Suddenly finding out that the company bank account is frozen can cause major headaches for any director or business owner – and divert crucial attention to day to day trading needs. Our team at FWJ can help reduce that wasted time and free you up to continue running your business.
• Increased risk of personal liability as a director. A frozen bank account situation which is left unfixed can quickly lead to the company going in to insolvency. This can then lead to a range of personal claims against the former directors of a business – claims by liquidators for repayment of money in to the company, claims by HMRC, a threat of director disqualification and also money claims for disqualification compensation orders. In the even these are unpaid, these can even lead to a director being made bankrupt and losing his/her house and assets.

Our team at FWJ can help avoid the worst of these consequences. But only if quick action is taken. Otherwise a frozen bank account situation can quickly spiral out of control and be very hard to fix.

What assets may be frozen by a freezing order?

A full freezing injunction may only attach to assets against which a court judgment could potentially be enforced. Over the years, a wide range of assets have been caught by the terms of a freezing order.

The terms of the order will always be strictly interpreted.

What types of assets are covered?

In principle, all types of assets can be frozen including, for example

• bank accounts;
• shares;
• motor vehicles;
• land; and
• intangible assets such as goodwill.

Excluded assets include those which are perishable – food being an example.

The respondent must have an interest in the assets

It is necessary to show that the respondent/ defendant has either a legal or beneficial interest in the asset in question. Assets can be jointly owned or held by a third party for the benefit of a respondent.

If shares are frozen, the court order should also ensure that the company is restricted from dealing with the shares (possibly reducing the value of those shares). It is not always possible at the time of applying for a freezing injunction to know whether a respondent owns a particular asset or not. Where there is doubt the terms of the freezing order should include them and, if necessary, they should be amended at a later date.

How long can a bank account be frozen?

We are often asked “how long can a bank account be frozen”?

• If your bank has got wind of a winding up order against the company, it will almost certainly place a freeze on the company bank account, stopping you paying important suppliers, creditors or your own staff.
• Without a formal validation order application to the court, the bank account can remain frozen for a significant period of time. Dealing with a limited company bank account frozen situation is very important for the very survival of a company.

At Francis Wilks & Jones we deal with many validation order applications and successfully get court permission for payments to be made out of the frozen bank account to important suppliers, staff or creditors. We have an excellent track record of success in this area.

We also can make applications to have the winding up order itself dismissed from court and the winding up order reversed. This is often another important aspect of any situation dealing with the company frozen bank account and another area our validation orders team can assist you with.

I have a frozen business bank account, what do I do?

So you find yourself in a situation whereby your company has frozen bank accounts. What do you do next? First thing to note, is that Francis Wilks & Jones can help with the whole process.

1. Urgent action is needed if you are suffering from a company frozen bank account

This often happens after service of a winding up petition by a creditor or HMRC against the company. Suffering from a limited company frozen bank account situation can have dramatic consequences but it is possible to resolve and unfreeze company bank accounts and continue to trade.

2. Validation orders are often needed from the court to keep trading

The way to unfreeze an account is to apply to court for what is called a validation order. This type of court order allows certain critical payments to be made from the company bank account (eg to staff or suppliers).

• A validation order can be served on the bank and the bank will then enable those payments to be made.
• Without an validation order, either the payments cannot be made at all or if the company still manages somehow to make the payments without an order, it can then have dramatic personal consequences and claims against directors individually if the company is later wound up.

Therefore, if you are threatened with frozen bank account or actually have a limited company bank account frozen situation then you should always take expert legal advice.

At Francis Wilks & Jones we have an expert team of legal advisers who specialise in acting for companies facing winding up petitions, reversing winding up petitions, unfreezing assets and unfreezing bank accounts.

• We can help companies continue to trade even in the most difficult of circumstances.
• However, urgent action is always needed. Delay can really prejudice any kind of application to unfreeze a bank account by way of a validation order.

Making the validation order application quickly but with expert legal advice maximises the chances of success and also the ability of the company to continue to trade. Contact one of our expert company frozen bank account advisers now and we can help you.

Next step: Get a validation order

Following service of a winding up petition on a company, the company can often find its company bank account frozen.

This is because the bank is very aware that any movements of money in the account after it has been put on notice of a winding up petition might possibly lead to a potential claim against the bank for allowing monies to be spent from the bank account. The bank therefore will often take the blanket approach of having the bank account frozen once it finds out about the winding up petition.

Validation orders are needed from court to keep trading

In order to unfreeze the frozen bank account, the debtor company must make a court application for a validation order to allow them to continue trading.

• validation orders are a type of court order which allows (or validates) the debtor company to continue trading and to continue using monies in its bank account.
• once the validation order has been received from the court following an application, it is served on the bank and the bank will enable monies to be used from the bank account.

Even where a petition is formally unadvertised in the London Gazette (an “unadvertised winding up petition”), the bank can find out about it from the Central court Register and as such, a debtor company can quickly find his bank account frozen even when a winding up petition has not been formally advertised in the London Gazette.

Therefore, as soon as a debtor company is served with a winding up petition, it is very important it thinks carefully about obtaining a validation order in order to keep trading and also to avoid possible personal liability for the directors for making void dispositions from the company’s bank accounts.

A validation order from court can help fix things

What is often needed is an urgent court application called a validation order. This type of court order can unfreeze the bank account in full or in part.

It is an application to the court is needed, it is made pursuant to paragraph 9.11 of the practice direction relating to Insolvency Proceedings.

For full details on how we can help make these applications, read more in our brilliant webpage all about this subject – “How do you apply for a validation order?”

We can help win the court application to unfreeze your account

These applications do require the expertise of validation order solicitors in order to make them successful.

• at Francis Wilks & Jones we have undertaken many validation order applications over the years and have dealt with many hundreds of winding up petition situations;
• we can help you prepare the detailed witness evidence you need in order to convince the court to make the order and we also have excellent contacts with external validation order barristers to help make the validation order application.

We can guide you through the application to unfreeze your company bank accounts and make sure you have the best chance of continuing to trade successfully.

Reversing a winding up petition – how we can help

Having a winding up order reversed is another way to unfreeze a bank account. There are different grounds to have a winding up order reversed and we can advise you on the best way to do this. Since 2002, we have helped 100’s companies reverse and remove winding up orders and allow them to keep trading. Ways we can help include

• applying to strike out the petition if it is subject to a genuine dispute or you have a valid cross claim against the debtor;
• applying for an injunction to stop advertisement in the London Gazette;
• negotiating a settlement of the petition and having it withdrawn;
• paying the debt in full and having it dismissed.

Much depends on your company circumstances and the whether the claim against you is a good one or not. Our team are experts in quick and decisive action. You can read more about how we can help deal with winding up petitions on our other key web pages – “appealing winding up orders” and “dealing with and defending a winding up petition”.

Examples of how we have helped our clients

We are proud of the work we do for our clients with frozen bank accounts – often working very quickly to fix the problem, allowing the business to continue trading and freeing the directors and business owners from the risk of personal claims from the bank, HMRC, the Insolvency Service or the bank.

Examples of how we have helped our clients can be seen below

• Obtaining a validation order and negotiating settlement with HMRC and having winding up order withdrawn.
• Unfreezing a bank account for a care home so that it could continue trading.
• Unfreezing a construction company’s bank account and dismissing the winding up order.
• Dismissing a winding up petition against a pharmacy and unfreezing its bank account.

Read more for more examples of work we do for SME’s, Directors and business owners.

One of the most astute appointments I have ever made.

A company director

I was greatly impressed with the commercial, tactical and technical ability of the team at FWJ. They quickly got to grips with a complex set of facts and, through their hard work, had the proceedings against me dropped and a significant proportion of my legal fees repaid. I couldn’t recommend them highly enough.

A company director facing various claims

Other expert business help from Francis Wilks & Jones

Winding up Petition expertise

At Francis Wilks & Jones, we our winding up petition team have a brilliant track record of

• Winding up Removal
• Frozen Bank account assistance
• Validation Order Help and Continuing to Trade
• Negotiating Settlement of Winding Up Petition
• Delaying or postponing winding up court hearing
• Withdrawal or dismissal of the winding up petition from the court
• Advertisement in the London Gazette
• HMRC winding up petitions
• Disputed winding up petitions
• Injunctions to stop the issue or advertisement of the petition

Director Defence

Our specialist Director Defence team has been helping directors since 2002. We can assist with issues such as

• Bounce Back Loan Defence
• Advising on Director Duties
• Defending Personal Claims against Directors by Liquidators
• Director Disqualification

Company Rescue

Our expert company rescue and turnaround team can help with the following

• Company rescue
• Insolvency & Restructuring Advice
• Administrations
• Liquidations
• Company Voluntary Arrangements

HMRC and Tax Disputes

Our team is headed by Andy Lynch who spent 18 years at HMRC before joining FWJ to help defend companies and directors.

• HMRC winding up petition defence
• HMRC Investigations
• R&D Tax Credit investigations
• PAYE and VAT Security Notices
• Loan Charges
• Time to Pay Agreements

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Whatever situation you face with a winding up order, frozen bank account or any other type of business claim – we can help you. Call our team today for a free consultation.

Or ring Andy Lynch, James Roberts or Stephen Downie now. They are here to speak to you in confidence now.

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