The Compendium

A Moratorium allows an insolvent company, or soon to be insolvent company, to gain protection without the need for terminal insolvency proceedings, while it seeks a rescue.

[See ‘Moratorium’, ‘Corporate Insolvency and Governance Act 2020’, ‘CIGA’, ‘Debtor in Possession’, ‘Insolvency Practitioner’ and ‘Director’.]

Moratorium (Administration)

The filing of a Notice of Intention to Appoint an Administrator (out of court) … … or the making of an application for the appointment by the court (in court) operates to impose an interim moratorium, pending the appointment of an Administrator taking effect.

Upon the Administrator’s appointment, Sch B1 paras 42-43 Insolvency Act 1986 kick in to impose the full moratorium.

A moratorium stops the enforcement of remedies when a company is in Administration, whether it is ‘out of court’ or an Administration Order by the court.

When a company is in moratorium enforcement cannot take place without either:

• The consent of the Administrator; or
• Permission of the court.

However, these restrictions are merely procedural in effect. The company, under the Administrator, can still trade and incur liabilities, and they do not affect the existence of the claims or rights of the other party, merely restricting their enforcement.

The remedies that cannot be enforced whilst the company is in moratorium are as follows:

• A winding-up petition to compulsorily Liquidate the company must be dismissed upon the making of an Administration Order … … and must be suspended in situations where the qualifying floating chargeholder appoints an Administrator.
• No resolution to wind-up the company may be passed, nor any winding-up Order be made (except in very rare and exceptional circumstances).