- Solicitors For Business
- Solicitors For You
- About Us
- News & Events
Applying for a Moratorium
On 26th June 2020, a new rescue procedure was introduced by the government to allow companies in financial difficulty breathing space in which to explore their options. This is a ‘free-standing’ moratorium, which protects a company from creditor action during the period in which the moratorium is in force.
Our corporate recovery and insolvency solicitors can provide specialist technical and practical advice to company directors, creditors and insolvency practitioners on a wide range of issues relating to moratoriums.
How JMW Can Help
We are able to advise directors on when a moratorium is appropriate and guide them through the necessary steps prior to and during the moratorium. Our team can also help with selecting an insolvency practitioner, and provide advice on the possibility of a turnaround or sale of the entire business, or part of it.
The team can also help insolvency practitioners acting as proposed monitors or monitors by providing advice on all aspects of the moratorium and the monitor’s duties and obligations, and preparing the paperwork for a moratorium, including applying to the court or asking for an extension.
What is a Moratorium?
The meaning of moratorium is to temporarily prohibit an activity, for instance, legally authorise the postponement of a payment.
A company obtains a moratorium by the directors lodging the relevant documents at court, upon which the moratorium comes into force. If the company has a winding-up petition against it, then an application to the court for a moratorium is necessary.
A moratorium requires a licensed insolvency practitioner to confirm that it is likely that a moratorium for the company will result in the rescue of the company (as opposed to the business) as a going concern. The insolvency practitioner must consent to act as a monitor to supervise trading throughout the period of the moratorium.
The monitor may terminate the moratorium at any time if they think that the moratorium is not likely to result in the rescue of the company as a going concern.
Extending a Moratorium
The moratorium initially lasts for 20 business days, but can be extended by the directors with the agreement of the monitor for a further 20 business days, without the involvement of creditors. The director can apply to the court at any time for an extension of the moratorium.
If the directors wish to extend the moratorium beyond 40 business days, secured and unsecured pre-moratorium creditors must vote by a majority in favour of the proposed extension. A moratorium may be extended more than once with the approval of creditors, provided it does not extend beyond one year from commencement.
A moratorium cannot be extended unless the directors make a statement that all post moratorium debts of the company, which have fallen due, have been paid.
Restrictions During Moratorium
A company is subject to various restrictions during the moratorium, such as restrictions on:
- Payments of certain pre-moratorium debts
- Disposals of property
- Disposal of hire-purchase property
- Obtaining credit
- The granting of securities
Subject to some of these restrictions being relaxed or lifted with the consent of the monitor and/or court.
Talk to Us
If you need legal advice or assistance with any issues relating to moratoriums, contact JMW today by calling 0345 872 6666, or fill in our online enquiry form to request a call back at your convenience.