CIGA bitesize: Obtaining a moratorium

The Corporate Insolvency & Governance Act 2020 (CIGA) introduced a free-standing moratorium process which provides companies facing financial difficulties (but which are likely to be rescued) a statutory breathing space from creditor pressure for up to 12 months. Directors retain control remain in control of the day-to-day running of the business while considering restructuring options, overseen by an insolvency practitioner acting as a ‘monitor’.


Entry into the moratorium for eligible companies is governed by Chapter 2 of Part A1 of the Insolvency Act 1986 (IA 1986), as inserted by s.1 CIGA. Ineligible companies (set out in new Schedule ZA1 to IA 1986) include certain entities in the financial sector such as insurers and banks, and companies currently or recently subject to insolvency procedures (including CVA, administration and liquidation or a prior moratorium in the last 12 months).

Entry procedure

There are two ways to obtain a moratorium:

1. The directors can do so by filing the following with the court, much like an out of court administration process:

  • A statement from the directors to certify that the company is, or is likely to become, unable to pay its debts;
  • A statement from the proposed monitor(s) confirming that, in their view, it is likely that a moratorium will result in the rescue of the company as a going concern.
  • Where there are to be joint monitors, a statement specifying the functions they will exercise jointly or by all or each of them.
  • If the company is regulated by the FCA and/or PRA, the consent of those regulators to the company obtaining a moratorium.

2. If there is an outstanding winding up petition or the company is an overseas company, the directors must make an application to court, accompanied by the documents above.

When does the moratorium start?

A moratorium made following a court application comes into force on the day the court makes the order (s.A7 IA 1986). A moratorium obtained by the directors filing the documents with the court (the ‘out of court process’), comes into force at the date and time at which the documents are filed with the court. If filed electronically the documents are deemed filed at the date and time recorded in the filing acknowledgment email (para 10, CIGA Practice Direction).

What is its effect?

Similar to the moratorium arising in administrations, during the period of the free-standing moratorium:

  • no insolvency proceedings may be commenced against the company, unless applied for by the directors or on the grounds of public interest
  • creditors cannot take steps to forfeit, repossess goods, enforce security or continue most legal processes against the company unless the court permits (note: neither the directors nor the monitor can agree – s.A21 IA 1986).

How long is the moratorium for?

The ‘initial period’ of the moratorium is 20 business days, beginning with the day after the moratorium was obtained (s.A9(2) IA 1986). For an outline of how this period can be extended, see our article CIGA: Extending a Moratorium.

For further information on this article, please contact a member of our Restructuring & Insolvency Team or visit the CIGA page.

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