Wouldn’t life be better if we all had a pause button?
Now this might sound like the beginning of a cautionary scary story but hear us out.
We’ve all had days when things seem to be conspiring against us and all decide to land on us at the same time. This is when the personal pause button could be deployed to allow you to catch a breath, look at the situation and decide how you’re going to tackle each problem.
You can then proceed in order, giving each task your full and undivided attention before moving onto the next one until eventually, your slate is cleared. You can then unpause and continue feeling lighter and more confident and organised.
The thing is – businesses that are wrestling with financial problems have a ready-made pause button waiting for them.
It’s called a moratorium and while it can take several different forms, its essential function remains the same – buying business owners and directors valuable time to take stock of their situation and work on their next move without the threat of imminent legal action hanging over them.
What is a moratorium?
A moratorium refers to the temporary suspension of ongoing legal action as well as the prevention of new proceedings brought against you by creditors. It prevents the following:
- Creditors cannot take action to secure ot repossess goods you have on hire purchase agreements
- Creditors cannot enforce security over company assets
- Creditors cannot issue Winding Up Petitions or commence or continue any other insolvency proceedings against the company
- Creditors cannot take and other legal action against the company or its asses
- Landlords cannot commence Commercial Rent Arrears Recovery or forfeiture
- Bailiff enforcement or High Court action for pre moratorium debts cannot begin or continue
Although a moratorium is not a permanent solution, it does provide some welcomed breathing room so you can explore your options.
What are the types of moratoriums?
- Insolvency Moratorium
An insolvency moratorium provides enclosed legal breathing space to directors who feel their companies will soon become insolvent but are ultimately viable and can be rescued.
The company’s director can still continue to control the day-to-day running of the company but they will be under the supervision of a licensed insolvency practitioner who will act as a ‘monitor’. They will ensure that the moratorium is likely to lead to the company’s rescue as a going concern.
If an insolvency moratorium is granted it will last for 20 working days and can be extended for a further 20 working days if required.
- Company Voluntary Arrangement (CVA)
A CVA is a formal insolvency procedure in which a company and its creditors agree that a proportion of the businesses debts can be written off and the remainder of the debt will be paid back in regular monthly instalments across an extended period of time.
Although it does not automatically lead to a moratorium, you can apply for a moratorium while you consider if a CVA is the right option for you. If your application is successful, the moratorium will be in place for 28 days giving you the opportunity to work with an insolvency practitioner to create a CVA proposal.
An administration is also a formal insolvency procedure, which puts a company under the control of an external administrator to see if the company can be rescued and if the owners can turn things around.
If you decide to go ahead with an administration, there are two moratoriums you will benefit from. The first moratorium, the interim moratorium, is granted when you file a notice in court to appoint an administrator which protects you for the first 10 business days. Once you have appointed an administrator, the permanent moratorium begins which protects your company against creditor legal action until it exits administration.
So if your business is under significant financial pressure from creditors and could do with calling a timeout then get in touch with us today.
We offer a free initial consultation for any director or business owner who needs some impartial, expert advice on what they can do to help get their business back in shape this new year and how they can achieve it.
Arrange your call with us now and we can begin to work with you to provide the pause you need.