Q&As

Does section A21 of the Insolvency Act 1986, which places restrictions on the legal and enforcement proceedings that may be commenced against a company subject to the new ‘moratorium’, prevent a party to a construction contract commencing or enforcing adjudication against a counterparty that is subject to the moratorium?

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Published on LexisPSL on 18/09/2020

The following Construction Q&A provides comprehensive and up to date legal information covering:

  • Does section A21 of the Insolvency Act 1986, which places restrictions on the legal and enforcement proceedings that may be commenced against a company subject to the new ‘moratorium’, prevent a party to a construction contract commencing or enforcing adjudication against a counterparty that is subject to the moratorium?

Does section A21 of the Insolvency Act 1986, which places restrictions on the legal and enforcement proceedings that may be commenced against a company subject to the new ‘moratorium’, prevent a party to a construction contract commencing or enforcing adjudication against a counterparty that is subject to the moratorium?

Section 1 of the Corporate Insolvency and Governance Act 2020 (CIGA 2020) introduces a new Part A1 to the Insolvency Act 1986 (IA 1986), which enables eligible companies to apply for a statutory moratorium. The moratorium is designed to allow viable businesses time to restructure or seek new investment, free from creditor action. In terms of IA 1986, s A21, during the moratorium, ‘(e) no legal process (including legal proceedings, execution, distress or diligence) may be instituted, carried out or continued against the [eligible] company, except…(iii) with the permission of the court’.

Before considering further how this might impact on the ability of a party to a construction contract, to either commence an adjudication against a counterparty who is subject to a moratorium, or who wishes to enforce an adjudication decision against such a counterparty, note the following points:

  1. IA 1986, Pt A1, suggests that adjudication proceedings, and court proceedings to enforce an adjudicator’s decision might, in practice, be dealt with differently

  2. the legislation distinguishes between pre-moratorium debts, for which the company in moratorium has a ‘payment

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