R3 proposes moratorium for businesses facing insolvency

R3 proposes moratorium for businesses facing insolvency
Directors of struggling companies sometimes lack time to make considered decisions about their company’s future when facing insolvency, a report from insolvency experts R3 says. R3 is recommending a 21-day moratorium, during which creditors will be prevented from taking any action to recover their debts.
R3 is recommending the moratorium in order to counter problems caused by creditors pressuring to have a struggling company wound up, rescue deals leaving unsecured creditors out of the loop, and directors putting off seeking advice or taking action until it is too late.Under R3’s proposals:

  • the moratorium period will last 21 days, and can be extended either with the issue of a CVA proposal or by applying to court for a 21-day extension
  • the directors will remain in control of the company during the moratorium
  • a licensed insolvency practitioner will act as a Moratorium Supervisor
  • companies in a moratorium must meet debts created during the moratorium and directors must confirm that funding is in place when filing the notice of moratorium in court
  • suppliers may not withdraw supply or change the terms of supply during the moratorium—although suppliers may request to be paid pro forma or require a guarantee from directors
  • creditors may challenge the moratorium in court
  • there should be a publically-accessible register of moratoriums

R3 says introducing a broad moratorium would be in tune with proposals made by the European Commission, and would introduce to the UK a positive aspect of the US insolvency regime without importing the downsides.

Source: Report: A Moratorium for Businesses—Improving Business & Job Rescue in the UK

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