There are several measures included in the new Corporate Insolvency & Governance Act – some temporary such as the suspension of winding up petitions and wrongful trading provisions – but the most significant is the introduction of an Insolvency Moratorium.
What is the Insolvency Moratorium?
It grants businesses some ‘breathing space’ from creditors to allow a recovery plan to be formed to restructure the company’s debts.
In the first instance a break of 20 business days is automatically granted, but this could be further extended for another 20 business days if required. More extensions could also be granted but these would require creditors consent.
What does the moratorium do?
Unlike administration, directors retain control of the business and its day-to-day management.
Additionally all legal proceedings and recovery actions are put on hold, including, but not limited to:-
The company must also continue to pay the following during the moratorium period:-
How can the moratorium conclude?
There are a number of ways a moratorium can succeed including:-
A moratorium can’t be used to plan for a pre-pack administration, so the company would be exposed to creditor actions whilst preparing to commence the process.
Insolvency moratoriums will be an extremely useful tool for insolvency practitioners to assist companies with rescuing and restructuring.