Focus On: Company Moratorium
22 May 2023
Insolvency & Debt Recovery
The Corporate Insolvency and Governance Act 2020 introduced a free-standing moratorium to give UK companies a breathing space in which to pursue a rescue or restructuring plan. However, in Northern Ireland it was necessary to amend the Insolvency (Northern Ireland) Rules 1991 and this was delayed as a result of the Northern Ireland Executive’s suspension.
However, since 13 March 2023, companies in Northern Ireland can now avail of this moratorium. If granted the moratorium will run initially for an initial 20 business days, which can be extended by the Directors for a further 20 business days. During the moratorium legal action cannot be taken by creditors (secured or unsecured) against the company without court permission. Importantly during the moratorium period creditors cannot chase payment for pre-moratorium debts. Whereas before this before a moratorium could only be implemented under an insolvency procedure, e.g. CVA, this new measure provides stand-alone legal protection which does not automatically conclude in a formal insolvency process.
The moratorium is designed to give the company an opportunity to solve their financial problems, away from legal pressure. It is not a long-term solution but rather a short and temporary period of relief. During the moratorium, the company will be granted a payment holiday from all debts prior to the commencement of the process. This means the company cannot make payments against these debts without permission from the monitor.
During the moratorium, which is monitored by the insolvency practitioner appointed, the directors retain day to day control (unlike an administration where the administrator has control). However, the assets of the company cannot be disposed of during the moratorium period, without the monitor’s permission.
The moratorium will end if the monitor believes that the company is past the point of rescue, the rescue of the company has been achieved, the moratorium period comes to an end without being extended or if the company enters into a formal insolvency process.
If you or your business requires further advice or assistance, please contact the Insolvency and Debt Recovery team at MKB Law.
This article is for general guidance only and should not be regarded as a substitute for professional legal advice.