The company bank account has been frozen
A frozen company bank account stops everything at once: wages, suppliers, direct debits and card payments. The cause matters more than the symptom, because the remedies are completely different. The most serious cause is a winding-up petition, where the remedy is a validation order from the court. Other causes need entirely different responses, so establish which one you are facing before doing anything else. Insolvency Act 1986, s.127; gov.uk
- Most serious cause
- A winding-up petition, which voids dispositions under s.127
- The remedy for that
- A validation order from the court
- Other causes
- Third-party debt order, freezing order, bank AML or fraud review
- First step
- Establish the cause in writing, from the bank
- Do not
- Move funds to a personal or another company account
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Find out why, before anything else
The bank will not always volunteer the reason, but it will normally confirm whether the freeze follows a court process or its own internal review. That single fact splits the situation in two. If it is a winding-up petition, you are on a court timetable and the remedy is a validation order. If it is an internal review, there is no court involved and the route is the bank's own escalation and complaints process. If it is a third-party debt order, a specific creditor is attaching a specific balance. A court freezing order and the bank's own anti-money-laundering or fraud review are different again. Ask, in writing, and get the answer in writing, because acting on the wrong assumption wastes the days you have.
If it follows a winding-up petition
Once a petition is presented, section 127 of the Insolvency Act 1986 makes any disposition of company property void unless the court validates it. That is why banks freeze accounts as soon as they learn of a petition, usually when it is advertised in The Gazette, rather than merely monitor: a bank that lets money out could be required to replace it. A validation order asks the court to permit specific payments, commonly wages, rent, and suppliers essential to continued trading, so the business can keep trading while the petition is dealt with. Applications are usually supported by evidence that continued trading benefits creditors as a whole rather than preferring one of them. This is court work and needs a Licensed Insolvency Practitioner and usually a solicitor, quickly.
What not to do
- Do not move money to a director's personal account, to another company you control, or to a new account opened for the purpose. If a petition is in play those transfers are the dispositions section 127 is aimed at, and unwinding them personally is a real risk rather than a theoretical one.
- Do not pay one pressing creditor ahead of others on the assumption it will help, because preferring a creditor when insolvent can be challenged later.
- Do not simply keep trading and hope, because obligations you incur now are incurred by a company that may already be insolvent.
Keeping the business running meanwhile
Practically, the priorities are wages, anything that stops the business trading entirely, and communication. Staff should be told something accurate before they discover a failed payment. Suppliers on direct debit will see the failure within days and will usually respond better to an early call than to a bounced payment. If a validation order is being sought, wages are the payment courts most commonly permit, which is worth knowing before you decide what to prioritise.
Common questions
How long does a freeze last?
It depends entirely on the cause. A freeze following a winding-up petition typically lasts until the petition is resolved or a validation order is granted, which is days to weeks rather than hours. A bank's own review can be resolved quickly or can run for weeks with little explanation, because the bank is often restricted in what it can tell you.
Can I open an account at another bank?
You can try, but banks run checks and a company with an advertised petition against it will usually be declined. More importantly, if a petition is in play, moving trading to a new account does not escape section 127: dispositions from company property remain void whichever account they pass through.
Can I still pay wages?
Not from a frozen account without permission. Where the freeze follows a petition, wages are among the payments a validation order is most commonly sought and granted for, precisely because keeping staff is usually in creditors' interests too. That is an application to court, not something the bank can simply agree.
Does a frozen account mean the company is finished?
No, but it does mean the position needs resolving quickly and with advice. Companies do trade through petitions with validation orders in place. What makes the outcome worse is delay, and moving money in ways that later have to be unwound.