Insolvency Moratorium

A new set of laws came into force in June - The Corporate Insolvency & Governance Act 2020 -which permanently brought in insolvency moratoriums.

They allow a business a minimum of 20 working days “breathing space” from creditors demands, extendable if required, in order to allow them to work on a rescue plan and restructure the company’s debts.

 

An insolvency practitioner has to be appointed by the company to act as a “monitor” in order for a company to officially enter an insolvency moratorium.

 

They’ll make sure that any plan agreed is viable and that all restrictions imposed are being upheld.

 

A company can successfully exit a moratorium once it sets up an agreeable payment plan; raises necessary funds to pay creditors or if creditors approve a Company Voluntary Arrangement (CVA).

Trading Administration

A rarer but useful form is a trading administration where the company continues to operate and trade while the administrator looks to sell it.

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Partnership Voluntary Arrangement (PVA)

In practice, a Partnership Voluntary Administration (PVA) is virtually identical to a Company Voluntary Administration (CVA) with the differences being those specifically related to the different structure of partnerships.

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Pre-Pack Administration

There’s nothing new about Pre-Pack — it’s just a more efficient and effective administration procedure for viable companies.

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Frequently Asked Questions

  • Stops legal action against the company from creditors and HMRC
  • Directors remain in charge of the business allowing continuity
  • Allows for continuity of business
  • If the company is unable to be saved as a going concern then the moratorium will end and the company would likely enter administration or liquidation
  • Creditors actions would be live again
  • Cannot be used to prepare for a pre-pack administration