How does the new standalone moratorium affect insolvent companies?

Introduced as part of the Corporate Insolvency and Governance Act 2020 (CIGA), Jon Munnery of UK Liquidators looks at how the standalone moratorium represents a new option for insolvent companies.

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What is the Corporate Insolvency and Governance Act 2020?

The Corporate Insolvency and Governance Act 2020 (CIGA) permanently increases restructuring options for businesses experiencing financial difficulties, and included temporary measures aimed at easing some of the most pressing consequences businesses experienced as a result of the coronavirus (COVID-19) pandemic.

CIGA contains significant reforms to the UK's restructuring and insolvency framework, including an accelerated introduction of measures, such as the ‘company moratorium’, which had been in contemplation for some time.

What is the CIGA standalone moratorium?

In a nutshell, the standalone moratorium gives a viable, yet insolvent, company the time and breathing space needed to formulate a longer-term solution to their current financial challenges alongside the guidance of a licensed insolvency practitioner.

While the moratorium is in effect, no legal action can be continued (or started) against the company and a payment holiday from the majority of pre-moratorium debts will also be granted. The day-to-day running of the company will remain in the control of the current directors, although they will be under some restrictions regarding obtaining new lines of credit and disposing of company assets.

The moratorium has a strict qualification criteria which is as follows:

  • the company must be insolvent or in danger of soon becoming insolvent
  • the company must be deemed viable; the moratorium cannot be used simply as a way of delaying the inevitable
  • it must be believed that the granting of the moratorium will increase the likelihood of the company being rescued

Once approved, the standalone moratorium runs for an initial 20 business days, which can be extended by a further 20 business days if required. Further extensions can be granted although these will require the consent of the company’s outstanding creditors, or alternatively approval from the court.

A moratorium can only be entered into under the guidance of a licensed insolvency practitioner who will assume the role of monitor throughout the process. It is the monitor who must attest to the suitability of the mortarium during the application process.

The monitor is obliged to continue to assess the financial and operational position of the company during the term of the moratorium, and if at any point they form the opinion that the company cannot be rescued, the moratorium must be brought to an immediate end. 

How does a moratorium end?

The moratorium may act as a gateway to entry into a formal insolvency procedure but as the name suggests, the moratorium can be used as an entirely standalone process. While many companies will want to use this time to explore their restructuring and refinancing options, it may be the case that the protection afforded by the moratorium could be enough in itself to allow the company to turn around its fortunes without further intervention by way of a formal insolvency procedure being required.

If it is determined that an insolvency process will be the exit route out of the moratorium, the monitor will use this time to explore the options open to the company based on its current position and future viability. Due to the protection given by the moratorium, this can be done free from creditor pressure and threats of legal action meaning any proposed solution can be carefully considered before a final decision is made.

Options which may be appropriate following the moratorium include a company voluntary arrangement (CVA) or placing the company into administration:

  • A CVA functions as a formal and legally binding repayment plan entered into by an insolvent company and its creditors. A CVA typically lasts between 3-5 years, during which time the indebted company makes a regular agreed repayment towards its debts. A company must obtain the consent of its creditors before a CVA can be implemented.
  • Administration can be used to rescue the whole, or part, of a business. This can be achieved through a sale to a connected or unconnected party, or alternatively via a full restructuring process whereby unprofitable elements are closed down, leaving a trimmed down more efficient operation.

If a formal insolvency process is decided upon then the moratorium will be brought to an end once the company enters into the chosen procedure. Alternatively, the moratorium will automatically end once no further extensions are sought or granted.


While the moratorium may not be suitable for every company experiencing financial challenges, for those viable businesses who need time to consider their long-term options, this short-term solution could prove to be extremely useful.

About the author

Jon Munnery is an insolvency and company restructuring expert at UK Liquidators, a leading provider of company liquidation services to both solvent and insolvent limited companies.

See also

Place an insolvency notice

What you need to know about Corporate Insolvency and Governance Act 2020

The UK Restructuring Plan: an overview

Find out more

Corporate Insolvency and Governance Act 2020 (Legislation)


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Publication date

17 October 2023

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.