Unexpected Company Bank Account Closures & how to deal with them
As a business, the unexpected can often occur, and sometimes it feels as if it’s always on a Monday morning before you’ve had your coffee. Few things can be as unpleasant as a bank unexpectedly closing your company’s account. This has become more common in recent years, due to bank de-risking and small businesses have often been impacted.
Understanding the ‘Why’
Before delving into what to do, it’s essential to understand why a bank might choose to close your account without warning. Banks typically reserve this right for reasons such as fraudulent activity, persistent overdrafts, or regulatory non-compliance. Nigel Farage’s case reportedly stemmed from the de-risking policy many banks adopt, a strategy aimed at mitigating potential legal or reputational risks.
Immediate Steps to Take
- Communicate with the Bank: Engage the bank and seek clarity on the reasons for the closure. Mr Farage, for instance, reportedly contacted his bank to understand the reasons behind the decision. This information is vital in determining the next course of action.
- Notify Affected Parties: Reach out to clients, vendors, or employees who interact with your account regularly. Inform them about the issue to avoid unexpected bounced cheques or failed transactions.
- Secure Your Funds: If there are funds in the account, arrange to have them transferred to another account or ask the bank to issue a cheque for the amount.
- Seek Legal Advice: It’s essential to consult an accountant or solicitor to understand your rights and what steps to take. They can guide you on possible legal recourses or how to engage with the bank.
- Open a New Account: Start searching for a new bank to open a company account. One that won’t leave you high and dry like a teabag without a mug! Consider multiple banks to reduce the risk of experiencing such a situation again. It may be wise to find banks with a lower risk threshold or ones that cater specifically to businesses in your industry.
- Update Business Information: Once you have a new bank account, update this information with your clients, suppliers, service providers, and statutory bodies. This will ensure smooth operations moving forward.
- Review and Realign your Banking Practices: If the closure was due to a breach of the bank’s terms and conditions, review and realign your banking practices to avoid future issues.
Learning from Experience
It’s essential to learn from such experiences. Nigel Farage’s incident highlights the need for businesses to be prepared for the unexpected. Diversifying your banking relationships can act as a buffer against any one bank’s decision to close your account.
In conclusion, an unexpected closure of a company bank account, while certainly unsettling, should not be taken personally. Banks make decisions based on risk assessments and regulatory frameworks, not personal animosity. If your company finds itself in this predicament, use it as an opportunity to scrutinise your business practices, understand the nature of banking policies, and work towards ensuring robust compliance. In doing so, you will fortify your business against future challenges and emerge with a stronger, more resilient business.