Published on 14 December 2010 by Tony Groom




Rescue advisers are finding that once banks have become aware of an attempt to restructure they are now sometimes freezing a company’s account, thus further damaging its ability to trade. This is because banks do not understand the distinction between the various restructuring tools.




Where the company is in credit there is no statutory obligation on the company to notify its bank, however, there may be a contractual requirement, but whether or not there is an obligation, it makes sense to advise the bank to reassure them beforehand so as to avoid a ‘knee jerk’ reaction that might result in the account being frozen.

Some may question whether the banks can be trusted not to freeze an account if a company notifies them while it is in credit and assume that they cannot be trusted not to freeze an account in credit following such notification. However, when a company does not tell its bank, then the bank has grounds for believing that it has lost the confidence of the directors of their client company and trust between them is now an issue. Such trust issues get in the way of a relationship which is why business rescue advisers advocate always speaking to the bank before the bank finds out via other means.

In the current climate, the workload on the banks Insolvency Departments is heavy and this can mean a significant delay in resolving the situation when a bank does freeze an account. Far better to avoid the situation in the first place by engaging with the bank early in the rescue process.