Why banks freeze accounts and what a validation order does
Under section 127, any payment out of a company's assets after a winding-up petition is presented is void if the company is later wound up, unless the court has validated it. Banks do not want to be liable for those payments, so they usually freeze accounts as soon as they learn of an advertised petition.
A validation order removes that risk. Depending on the company's needs, it can:
- approve a specific payment, such as wages or a key supplier;
- allow the company to keep trading through its account until the petition is decided;
- validate the sale of an asset at a fair price.
Do not try to work around a frozen account by moving money through another account. Payments made that way are still caught by section 127 and can be reversed. Speak to us first.
What the court needs to see
The court must be satisfied that the payments are in the interests of the company's creditors as a whole. The evidence usually includes:
- up-to-date management accounts and a cash-flow forecast;
- evidence that the company is solvent, or that the petition is likely to be dismissed;
- an explanation of why continued trading benefits creditors, for example by preserving contracts, staff and goodwill;
- details of the petition debt and any dispute about it.
Applications can be heard urgently, sometimes within days. The petitioning creditor is normally given notice, and a well-prepared application with clear evidence gives the best chance of a quick order.
Common questions
How quickly can a validation order be obtained?
Urgent applications can often be listed within days, provided the evidence is ready. The quicker we receive the company's financial information, the quicker we can apply.
Can we pay wages while the account is frozen?
Only with a validation order or the bank's agreement. Payments made without one risk being reversed later.
Does a validation order stop the petition?
No. It keeps the business trading while the petition is dealt with. We deal with the petition itself at the same time.
Company bank account frozen? Call 0800 037 1305 now (international callers +44 1482 616 616), or request a call back using the form.
