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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 10257
Experience:  I have been practising for 30 years.
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Morning, if a bank froze a company bank account and there

Customer Question

morning, if a bank froze a company bank account and there was only 2 creditors of any substance,one creditor was prepared to wait and take the money back over several monthsand the other creditor wanted to issue a winding up order, which the company will be able to pay if the bank account is open,woulds this action by the bank make one of the creditors preferrantial and harm the position of the creditor that is prepared to wait?apologies for the spelling
Submitted: 4 months ago.
Category: Law
Expert:  F E Smith replied 4 months ago.

Hello please give me the background to what has happened to your company and what is owing to whom - thanks

Customer: replied 4 months ago.
HMRC want to issue a winding up order. Bank owed no money, account in credit. I have loaned company some money and am prepared to wait. I am not a shareholder or director. No other creditors. Being told by HMRC that the bank will freeze bank account
Expert:  F E Smith replied 4 months ago.

I apologise for the delay in keeping you waiting. I have had clients and travelling all afternoon.

If you still want a telephone call I’m happy to call you if you let me know when it’s convenient.

Meanwhile, I can tell you that HMRC are merciless and they will issue a winding up order if they claim that they are owed money, even if the likelihood is that they are going to get nothing out of it.

They are no longer treated as a preferential creditor but as an unsecured creditor along with all the other creditors.

The fact that one creditor may be issuing the winding up proceedings doesn’t put them first in the pecking order because if it did, then everybody would be queueing up to be first in line to put a company into liquidation because it would put them at the front of the queue.

So the creditor that is prepared to wait and the creditor that is really pushing for this are simply in the same queue and would be paid out from any realisation monies, in direct proportion to the amount they are owed.

HMRC will make an application to freeze the bank account if it thinks that the directors of the company are going to take money out and disappear with it or put it beyond the reach of creditors. It doesn’t give any of the creditors in this scenario preference over any of the others.

.Can I clarify anything else for you?

I’m happy to answer any specific points arising from this.

Customer: replied 4 months ago.
Need to know if the bank freeze the account are they allowing one creditor to become preferential. And therefore I can then ask the bank to reimburse me any money I lose
Expert:  F E Smith replied 4 months ago.

Why are the bank suggesting that they are going to freeze the account of their own volition? Perhaps this is the point of your question but why would that allow one creditor to become preferential? Who are you thinking that would be?

If I could have the full background here that would be really useful please. Thank you

Customer: replied 4 months ago.
the bank say that they need to freeze the account as that's 'what they do' to stop them being accused of allowing monies to be spent elsewhere. no other creditor exists, so that if the bank freeze the account then the company will have difficulty trading. until sufficient money is paid to clear HMRC debt. will this not cause me a problem as the only other creditor? I want to stop the bank freezing the account automaticaly
Expert:  F E Smith replied 4 months ago.

If there is a winding up petition, the bank will automatically freeze the account. I don’t know there is a statutory requirement to do so but I know that is what will happen.

However, even if it hadn’t happened, if you took any money out of the account to use yourself, over and above what you would normally have taken out, and it disadvantaged any creditors, then HMRC or a liquidator can simply apply to court to have that money reinstated in any event.

I am not aware that they can freeze the account just because the hat was to be some money owed to the taxman or any other creditor for that matter but that’s not to say that HMRC couldn’t apply to court for a freezing order which they can get quite easily.

If you want to stop them freezing the account automatically, then you are faced with going to court to get an injunction to stop that