When Your Business Assets Are Frozen: The What, Why and How

Stressed business man sat at desk.

If a freezing order is placed on your business, all your business assets will be on lockdown.

But why might this happen, and what can you do if so? Find out here.

As a business owner, there’s a lot to contend with. Not only do you have to make sure you abide by every law and regulation there is, whilst also running the show from the top down. On top of this, you also need to make sure you’re keeping all your employees satisfied and happy in order to succeed.

With all this to think about, you wouldn’t imagine that you might also be faced with a freezing order or injunction on all your business assets. So, what exactly are freezing orders, and what can you do if you’re faced with one? This article explains all.

What Are Business Assets?

Assets within a business refer to any resource of value that helps you run the company. This could be anything you own or lease, covering everything from furniture to petty cash. Ultimately, it counts as anything you could feasibly sell to drum up some extra money to keep the business running.

Types of Business Assets

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Business assets can be categorised in a number of ways, based upon their convertibility into cash. These types include:

  • Current assets: these have a short life span, as they are easily transferable into cash. This could include actual cash, and other bank balances.
  • Fixed assets: these are the opposite of current assets, and are ones which are regarded as long-term investments in the future of the business. This could include employees and are unlikely to convert quickly into cold cash.
  • Tangible assets: within the above types, you also have tangible assets. These are objects you can physically touch, namely office furniture, computers, and buildings. This is basically all the physical and material attributes of the business.
  • Intangible assets: on a similar vein, you then have the opposite; resources which have no material substance, like the brand image and business value.

Examples of Business Assets

Now that we have an idea of the different types of assets your entire business includes, we want to ensure you understand everything as fully as possible. So, here is a list with some more examples of business assets:

  • Cash
  • Bank accounts
  • Cheques
  • Overdrafts
  • Stock
  • Prepaid expenses
  • Inventory
  • Property
  • Plants
  • Furniture
  • Machinery
  • Tools
  • Equipment
  • Investments
  • Land
  • Vehicles
  • Trade secrets
  • Franchise
  • Goodwill
  • Brand image
  • Reputation
  • Licenses
  • Intellectual property

What is a Freezing Order?

Now we know what business assets are, what happens if you face a freezing order on these assets? Well, a freezing order is an interim injunction which restrains a defendant in court from accessing or utilising any of their assets while a court makes a decision.

This could be a decision based on family law or criminal law, which we’ll discuss in more detail later on. It basically stops the defendant from having access to these assets in order to illegally hide, dispose of, or move them.

A freezing order usually lasts between 7 and 14 days, after which the court will convene again to choose whether to extend this order, discharge it, or continue it until trial. During this time, the defendant has every right to borrow money, meaning they may be able to cover living and business costs during these couple of weeks.

In order to ensure the injunction is carried out properly, the order must be written and prepared as carefully as possible. This is where a solicitor comes in handy, they can prepare the document so there are no loopholes, making certain it can’t be flouted or challenged by the defendant.

Why Do Freezing Orders on Business Assets Occur?

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As we’ve discussed, a freezing order may be enforced in a couple of cases. These include:

Family Law

During divorce proceedings, assets will be divided between each person to ensure both parties can part ways on equal terms. However, there are occasions where a spouse who is going through a divorce may attempt to conceal their assets in order to keep them for themselves.

Assets within a divorce don’t just include personal belongings and bank accounts, they also include any businesses. If the court has reason to believe a spouse has hidden or concealed assets within their business, they will freeze them. This way, they can ensure no concealment is taking place already and, in the meantime, the defendant cannot access their assets to conceal them further.

Criminal Law

In a similar sense, if a criminal conviction has come to light which suggests a person is obtaining or handling money illegally, an injunction may be put forward. This might occur if, for example, the defendant is suspected of money laundering. The freezing order provides the court with time to gather the evidence, meanwhile they cannot do anything with the remaining cash.

Grounds for Freezing Orders

You can’t just declare a freezing order and expect it to happen. There have to be reasonable grounds for it. In order to succeed with the order, the applicant must prove that:

  • They have an arguable case
  • There is a risk of dissipation of funds
  • The assets are within court jurisdiction
  • It is just to grant the order

Sometimes, there will be an initial hearing in the court to decide if an order is necessary. This is called a freezing order ‘with notice’, and allows the defendant the opportunity to throw out the case if they act quickly.

Alternatively, a ‘without notice’ order may be put in place, which allows the applicant to put forth a case for it without letting the defendant know. If the court has enough reason to grant the order, a return date will be set, and the defendant will be informed of the assets being frozen.

If it turns out that the injunction was unnecessary, the applicant will have to pay a fine for time wasted and any inconvenience to the defendant.

How Should You Deal with a Freezing Order on Your Business?

The applicant for the order will have to go through a few steps before the order lands on your desk. This will include filling out an application notice, drafting out a set of terms for the order, and any ancillary orders should also be considered. These are more specific terms which help to ensure better enforcement of the injunction.

The court may also request the defendant provide further financial information and a list of all assets, which must be gathered in good time prior to the hearing.

Once the order has been received, it’s absolutely paramount that you accept it and comply. If you don’t do so, this is regarded as contempt of court, which carries severe penalties, like fines and prison time.

Ready for Court?

As you can see, a freezing order can be very inconvenient for the recipient. However, they are a completely necessary element of the legal world to ensure people aren’t mishandling and concealing money. After all, this is a crime, and can be likened to criminal fraud.

Now that you know what a freezing injunction is and what might occur with one, it’s important you comply. Just hire a solicitor, gather evidence, sell your case when the time comes, and hopefully justice will be served.

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