We often hear from directors who have found that their bank account has been frozen, leaving them unable to pay their employees, purchase products and services, and make the type of transactions they’re used to making without a second thought.
If your company’s bank account has been frozen, you may be wondering how to access your funds. Read on to learn how a validation order may help.
Why has my account been frozen?
One of the most common reasons for a company’s account being frozen is that a winding up petition is underway. This will usually happen as a result of insolvency, with the law stating that all trading should cease.
If your account is frozen, it can be difficult to dispute a winding up petition because you might not have access to the funds you’d need for legal defence.
What is a validation order?
A validation order is a court order that a company can apply for to ‘unfreeze’ the company’s bank account.
Validation orders are outlined in the Insolvency Act 1986, although they’re not referred to under this name. If the court believes a validation order is necessary, it will enable banks to unfreeze all or a portion of your business funds.
Depending on the situation, the court may also state the money can be used for specific purposes such as paying employees or specified creditors.
The order will also prevent a liquidator from holding the bank liable for money being withdrawn.
How do I make an application for a validation order?
Applying for a validation order isn’t always the most straightforward of processes. The amount of information you’ll have to give will vary depending on the situation.
Usually, the application will request:
- The name of the company along with the trading/registered address
- An explanation as to what led to the petition
- The state of the company’s paid up and nominal capital
- The date in which the directors were made aware of the petition
- Details of the company’s financial status in terms of assets and debts
- Whether the WUP is being disputed or agreed
- A forecast of the company’s financial future
In some cases, the court may request additional information not outlined above. If HMRC petitioned for the winding up order, you’re likely to be subject to an extensive list of questions. This can make the process more complicated and more difficult to fight.
If your company is facing insolvency, you’ve been issued a winding up order or your bank account has been frozen, please get in touch with the team at Clarke Bell today. Our team of insolvency practitioners will do everything they can to help you find the right solution for your company.