What is a Freezing Injunction and What to do If You Face One?

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Negosentro.com | What is a Freezing Injunction and What to do If You Face One? | Has your business been faced with a freezing injunction? Discover what this is, why it might occur, and what to do about it, right here…

Business owners have a lot of responsibility on their shoulders, one of these being that their books are always in order. This ensures that all incoming and outgoing cash is recorded properly, and by law.

If this doesn’t occur, and if money is being hidden or laundered, a court case may ensue. This could mean your business faces a freezing injunction.

So, what actually is this, and why might your business end up having a freezing order placed on your accounts and assets? Find out here…

What is a Freezing Injunction?

A freezing order is an interim injunction which means the defendant cannot access or utilise their business assets for a period of time. This gives the court time – usually between a period of 7 to 14 days – to investigate the accounts. This way, they can do so without the risk of the defendant illegally disposing of, hiding, or moving the assets.

After this time, the court will convene again with their decision about the accounts; are they lawfully run, or is there suspicious activity going on? One way or the other, they will either discharge the case or continue onto a trial. This may lead to a criminal conviction, in some drastic cases, which we’ll discuss further later on.

During the frozen period, the defendant may experience some money troubles. So, they are usually permitted to borrow money from friends and family to mitigate the cost.

For a freezing injunction to be carried out properly and by law, the prosecutor or applicant should hire a solicitor to carry out the order properly. This includes making sure the documentation is all in order and is prepared as carefully as possible. Without this, there is a risk that the freezing order will be challenged, especially if there are glaring loopholes in it.

What Classes as a Business Asset? 

Now that we know what a freezing order or injunction is, you’re probably wondering what classes as a business asset. Well, this question will be answered now.

A business asset is a resource of any value that is in the business’ name, and has a value to it. This includes anything you own or lease, and covers a wide range of things, from the office all the way to the intellectual property rights. It all boils down to anything that could be sold in order to drum up cash for the company.

Types of Business Assets

For a little more detail, let’s break down the different types of business assets so you can understand it a little more. These include:

  • Tangible assets: these are anything the business owns which can be physically touched. This could include the office furniture and computers, as well as any products or materials purchased or created under the business name.
  • Intangible assets: on the opposite end of the scale, we also have the intangible assets, which are things that can’t be physically touched, but still have worth. This includes the brand image, the licenses, and other rights, for example.
  • Current assets: within these tangible and intangible goods, you have current assets, which are those with a short life span. They are easily and quickly transferable into cash, and could include bank balances, furniture, and the like.
  • Fixed assets: alternatively, you also have fixed assets, which are long-term investments for the business which can’t be so easily and quickly transferred into cash. This could include things like employees and trade secrets.

Examples of Business Assets

For even more detail, you might be looking for some more examples of business assets to help you understand the scope of it all better. With that in mind, here is a list of some examples of current, tangible, fixed, and intangible goods you might come across in a business:

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

Why Do Freezing Injunctions Occur?

A freezing order or injunction can be called into action in two different types of situations; a family law or criminal law case. Let’s dive into these a little further…

Criminal Law Cases

Starting with the more drastic of the two, a criminal case may come to light if a business’ accounts are looking suspicious and need investigating. This could be due to illegally handling or obtaining money, for example from tax evasion or money laundering.

In any case, this is a criminal offence, so must be taken to a court of law. Here, the court will order a freezing injunction, which will freeze the business assets so nobody can hide the evidence, or conceal or move the money.

Family Law Cases

On a less serious note, but still something which reaps serious consequences, is when a business owner conceals their assets from their spouse during a divorce. Divorce proceedings call for assets to be divided between both parties to ensure they can part ways on equal terms. That said, in particularly contentious cases, some spouses may conceal certain assets in order to keep them for themselves.

In these situations, the other spouse can apply for a freezing order, which will mean the court freezes the assets to investigate. This means they can ensure the defendant is not concealing any assets and, meanwhile, they can’t hide the evidence.

What Are the Grounds for a Freezing Injunction on Business Assets?

Freezing orders require a little more than just suspicion to be called for; there need reasonable grounds. With this in mind, there are a few factors that need to be considered before a freezing injunction can be put into action, including:

  • Whether there is an arguable case
  • Whether there is a real risk of dissipation or movement of funds
  • Whether the assets are within court jurisdiction
  • Whether granting the order is the just thing to do

A freezing order will either go ahead ‘with notice’ or ‘without notice’. These are:

  • With notice: a hearing at the court will decide if a freezing injunction is necessary. This provides the defendant with the opportunity to throw the case out quickly if they can act fast enough.
  • Without notice: this is where the applicant approaches the court for an order without giving the defendant time to act against it. If the order is granted, the defendant will simply be informed, and advised on the return date. If it turns out the order was unnecessary, the applicant will be required to pay a fine for the trouble.

What to do If Your Business is Faced with a Freezing Order

If your business is faced with a freezing order or injunction, there will be a few steps that will take place. Firstly, the applicant will have to file an application notice, and draft out the terms, usually with the help of a lawyer. This will also include any ancillary orders being set out, which should ensure the enforcement of the order is carried out properly.

The defendant may also be requested by the court to provide any more information, for example financial information. This should be gathered in good time so it’s ready before the hearing, and should help to quash the case before it goes any further.

If the court decides the order should be placed, it is a legal requirement that you accept and comply with it. If you don’t, this will be regarded as contempt of court, and fines may be put in place, and prison time could be on the cards.

Ready to Comply?

In this article, we’ve taken you through what a freezing order is, how and why it might be carried out, and what business assets are included within the injunction. We hope this has given you enough information to know what to do next.

As you can see, a freezing order is a pretty serious issue which must be adhered to. If not, there may be serious consequences, so first and foremost, you should be sure to comply.

Good luck with the future of your business!

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