Does the new moratorium introduced by the Corporate and Insolvency Governance Act 2020 apply to un-liquidated claims for compensation (for example, for discrimination) prior to the commencement of the moratorium?

Does the new moratorium introduced by the Corporate and Insolvency Governance Act 2020 apply to un-liquidated claims for compensation (for example, for discrimination) prior to the commencement of the moratorium?

Produced in partnership with Eleanor Stephens

The Corporate Insolvency and Governance Act 2020 inserts a new Part A1 of 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 insolvent, can obtain a 20 business day moratorium period (which can be extended up to 40 days maximum). The Act came into force on 26 June 2020. The moratorium is designed to allow viable businesses time to restructure or seek new investment free from creditor action.

There is eligibility criteria to be met in order to benefit from the moratorium, and the correct process needs to be followed to gain the benefit of the moratorium. The moratorium is monitored by an Insolvency Practitioner. For more detail on the practicalities and eligibility, see Practice Note: Corporate Insolvency and Governance Act 2020—moratorium.

The moratorium is similar to the moratorium for companies in administration. This means that during the period of the moratorium:

• no insolvency proceedings may be commenced, other than on an application by the directors or on public interest grounds

• no steps may be taken without the permission of the court in relation to forfeiture, enforcement of security (other than in relation to financial collateral), repossessing goods under a hire purchase agreement or instituting/continuing any legal process (other than employment-related claims)

The moratorium comes to end after 20 business days if an extension has not been sought, or if a company enters into liquidation, administration, an administration interim moratorium, CVA or Scheme of Arrangement. For full details of how the moratorium can be extended or terminated, see Practice Note: Corporate Insolvency and Governance Act 2020—moratorium extension and termination.

Note that IA 1986, s A21(1)(e) specifically carves out the following from the moratorium:

(e) no legal process (including legal proceedings, execution, distress or diligence) may be instituted, carried out or continued against the company or its property except—

(i) employment tribunal proceedings or any legal process arising out of such proceedings.

(ii) proceedings, not within sub-paragraph (i), involving a claim between an employer and a worker (as defined in IA 1986, s A21(6)).

This therefore suggests an exception for a discrimination claim, if it is a claim that is brought before an employment tribunal (or arising therefrom), and relating to a claim between an employer and a worker (as defined in IA 1986, s A21(6)). If the exemption does apply, the claim should be commenced or continued in the usual way.

However, given the purpose of the moratorium, which is to give a company suffering from the effects of the coronavirus (COVID-19) pandemic time to rescue and recover the business, and given the relatively short period of time given for the moratorium, it is envisaged that, unless falling within an exception under the IA 1986, the court will not go behind the moratorium lightly in order to allow proceedings to be taken against a company that has met the eligibility criteria for a moratorium.

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