Corporate Insolvency and Governance Act 2020—moratorium

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Corporate Insolvency and Governance Act 2020—moratorium
  • Who is eligible to apply?
  • How to apply
  • Relevant documents
  • During the moratorium
  • The monitor
  • Areas of concern

Corporate Insolvency and Governance Act 2020—moratorium

The Corporate Insolvency and Governance Act (CIGA 2020) inserted Part A1 into the Insolvency Act 1986 (IA 1986) which provides for a insolvency process whereby directors of insolvent companies, or companies that are likely to become insolvent, can obtain a 20 business day moratorium period. This 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 (or any process at all, if the company can be rescued during the moratorium without needing entry into an insolvency procedure).

CIGA 2020, Sch 4 contains temporary rules for the purpose of the moratorium to ensure the process could be used immediately after enactment. From 1 October 2021, The Insolvency (England and wales) (No.2) (Amendment) Rules 2021, SI 2021/1028, insert a new Part 1A into the Insolvency (England and Wales) Rules

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