By Iva Karen
KUALA LUMPUR, Dec 31: A sudden bank account closure can have serious operational, financial and reputational consequences for businesses, even long-standing customers, according to lawyer Vinayak Sri Ram.
He said the impact of an account closure is not uniform and depends largely on how central the affected account is to a company’s day-to-day operations.
“For industries such as construction, engineering and trading, banking access is operationally critical. Payroll, supplier payments, progress billings and statutory remittances typically move through one or two active accounts.
“An abrupt closure of a key operational account can immediately disrupt ongoing projects, delay payments and affect contractual performance, even where the business itself remains solvent. For businesses operating on tight cash cycles, even short delays can result in missed payroll, supplier defaults or breaches of financing covenants,” he said.
He pointed out that the consequences may be more pronounced for publicly listed companies, as an unexpected account closure could trigger disclosure obligations under Bursa Malaysia’s listing requirements.
“Once disclosed, the issue can affect investor confidence and market sentiment, and in some cases impact share prices, regardless of whether the closure arises from wrongdoing or compliance-related concerns.”
Vinayak noted that the severity of disruption also depends on practical factors such as the balance held in the account, whether overdrafts or trade facilities are linked to it, and the volume of transactions processed.
Beyond immediate disruption, Vinayak said businesses often face longer-term structural challenges, as opening replacement accounts is rarely straightforward. Other banks may impose enhanced due diligence or take a more conservative approach when onboarding affected customers.
“In Malaysia, bank account closures are not public events in themselves. However, their effects may become visible through Bursa disclosures, court proceedings or commercial payment failures,” he said, adding that liquidity risk is another major concern.
He explained, while funds are not usually lost, access to them may be delayed due to set-off, court processes or administrative timelines.
–WE