Moratorium

Moratorium

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) inserted a new Part A1 into the Insolvency Act 1986 (IA 1986) which provides for a new insolvency process whereby directors of insolvent companies, or companies that are likely to become unable to pay their debts (ie insolvent) can obtain a moratorium. This period lasts for an initial period of 20 business days, which can be extended. It is designed to allow viable businesses time to restructure or seek new investment free from creditor action. The moratorium is overseen by an insolvency practitioner acting as a ‘monitor’, although the directors will remain in charge of running the business on a day-to-day basis (known as a ‘debtor-in-possession’ process with the company being the ‘debtor’) subject to certain constraints. The intention is to provide a streamlined procedure that keeps administrative burdens to a minimum, makes the process as quick as possible and does not add disproportionate costs on to struggling businesses.

The moratorium is free-standing—it is not be a gateway to a particular insolvency.

Who is eligible to apply?

The company needs to meet the following criteria:

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