There are many reasons why a Company wants to close its corporate bank account(s). Some of the reasons are set out below:
- The Company wishes to end its business.
- The Company wishes to switch to another bank which better suits its needs or requirements.
- The Company wishes to streamline or restructure its bank accounts for cost or operational efficiency.
Closing a corporate bank account can be a relatively simple procedure. To ensure a smooth process, it is advisable to check the bank’s website or with your Company’s corporate banker on the requirements of closing a bank account.
We wish to highlight three points prior to the closure of your Company’s corporate bank account(s).
No. 1 - Ensure Authority given by the Board
Similar to opening of corporate bank account, closure of corporate bank account should also be authorised by the Directors of your Company. As mentioned in our previous blog post on Changing Bank Signatories – Simple Yet Important, it is important that the Directors of your Company are kept informed on matters relating to corporate bank accounts of your Company, which would typically be resolved by way of Board resolutions.
Directors of your Company certainly do not wish to get a rude shock of their lives to know that your Company’s corporate bank account is closed and all funds have been transferred without authorisation.
No. 2 - Update Relevant Stakeholders
The closure of corporate bank account would result in your Company not able to send or receive money using this said account. Hence, do make sure that your Company provides sufficient notice informing (i) customers so that they do not incur additional charges for bounced payments to your Company; and (ii) vendors so that they can expect to receive payments from your Company through a different corporate bank account.
Remember to stop or change automatic bill payments to and from this corporate bank account which is to be closed. Or your Company might be incurring unnecessary late fees or returned payment fees and even face complaints from unhappy stakeholders.
No. 3 - Handle the Balance Funds
When intending to close the corporate bank account, it is not necessary to withdraw all the funds remaining in the account beforehand. In fact, your Company should ensure available funds left in the corporate bank account to cover pending cheques and banking transactions or penalty for early account closure, if any. Some banks impose such a fee if the corporate bank account is closed within 6 or 12 months of opening.
You will also need to decide and instruct the bank on how to handle the closing balance. It can either be returned to the Company in the form of a cheque to the designated person, which preferably should be an officer of your Company e.g. Director. Alternatively, it can be transferred to an existing account of the Company maintained with the same bank, if any.
Key Takeaway
As mentioned earlier, closing a corporate bank account can be a relatively simple procedure. We have set out three key points you need to take note when closing your Company’s corporate bank account. We cannot emphasize enough – There must be proper governance and internal controls in place to govern the operations of the corporate bank accounts of your Company.
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