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).
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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