This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Explanation of the UK insolvency moratorium under the Corporate Insolvency and Governance Act 2020, including how it works, legal protections, duration, creditor restrictions, and its role in company rescue and restructuring.
An insolvency moratorium is a formal legal process in England and Wales that gives a company temporary protection from creditor enforcement while it attempts to restructure or rescue its business. It is designed to create breathing space so that viable companies facing financial distress can avoid immediate liquidation or administration.
The moratorium was introduced under the Corporate Insolvency and Governance Act 2020, inserting Part A1 into the Insolvency Act 1986. It is now a key tool in UK restructuring law and is often used alongside rescue procedures such as a company voluntary arrangement (CVA).
Legal Framework of the Insolvency Moratorium
The insolvency moratorium is governed by Part A1 of the Insolvency Act 1986, as amended by the Corporate Insolvency and Governance Act 2020.
Its main purpose is to:
- Prevent creditor enforcement action for a limited period
- Allow directors time to propose a rescue plan
- Preserve the company as a going concern where possible
It is not a form of insolvency itself, but a protective legal status intended to support restructuring.
How the Insolvency Moratorium Works
1. Entry into the moratorium
A company can enter a moratorium if it is:
- Unable to pay its debts, or
- Likely to become unable to pay its debts
Entry is typically achieved by filing documents at court or, in some cases, by court order.
A key requirement is the involvement of a licensed insolvency practitioner, known as the monitor.
2. Role of the monitor
The monitor is an insolvency practitioner who oversees the moratorium. Their main duties include:
- Confirming that the moratorium is likely to result in the company's rescue as a going concern
- Reviewing financial information provided by directors
- Ending the moratorium if rescue becomes unlikely
The monitor is not involved in day-to-day management but acts as an independent safeguard.
3. Duration of the moratorium
The standard duration is:
- 20 business days initially
It can be extended:
- By the directors (with creditor consent)
- By the court
- For longer periods if part of a restructuring process, such as a CVA or restructuring plan
Extensions depend on whether the rescue objective remains realistic.
Protections Provided by the Moratorium
During the moratorium period, the company receives significant legal protection.
1. Restriction on creditor action
Creditors cannot:
- Start or continue legal proceedings without court permission
- Enforce security (with limited exceptions)
- Initiate winding-up petitions
- Repossess assets in most circumstances
This creates a legal “standstill” on enforcement action.
2. Payment holiday on certain debts
Most pre-moratorium debts are subject to a payment holiday. However, some obligations must still be paid, including:
- Employee wages
- Goods and services supplied during the moratorium
- Rent for ongoing occupation of premises
- Certain financial services debts (with limitations)
3. Protection of essential supplies
Suppliers of utilities and essential services (such as gas, electricity, water, and IT services) are restricted from terminating supply due to pre-moratorium debt.
What Debts Are Covered
Pre-moratorium debts
These include obligations that existed before the moratorium began. Many of these are subject to a payment holiday.
Moratorium debts
These are debts incurred during the moratorium period. They must be paid as they fall due.
Failure to pay moratorium debts can result in termination of the moratorium.
Conditions and Eligibility Requirements
To enter and maintain a moratorium, several conditions must be satisfied:
- The company must be eligible under the legislation (some financial institutions are excluded)
- The monitor must consider that rescue is likely
- The company must be able to meet ongoing obligations during the moratorium
- Accurate financial disclosure must be provided
Certain companies, particularly those in regulated financial services sectors, are excluded or subject to stricter conditions.
Effect on Directors and Company Management
Directors remain in control of the company during the moratorium, but their actions are constrained by:
- The need to cooperate with the monitor
- Restrictions on disposal of assets
- Requirements to prioritise rescue outcomes
Director duties shift towards preserving the company's position and avoiding actions that could worsen creditor outcomes.
Risks and Limitations of a Moratorium
Although the moratorium provides breathing space, it is not a solution to insolvency on its own.
Key limitations include:
- It is temporary (usually short-term)
- It does not write off debt
- It requires ongoing funding to continue trading
- It can be terminated early if rescue becomes unrealistic
If the company cannot stabilise its financial position, it may still enter administration or liquidation after the moratorium ends.
Ending the Moratorium
A moratorium may end:
- Automatically after the permitted period expires
- If the monitor determines that rescue is no longer likely
- If the company fails to meet payment obligations
- If converted into another restructuring process (such as CVA or restructuring plan)
Once ended, creditor enforcement action can resume unless another insolvency procedure is in place.
Practical Example of Use
A company facing short-term cash flow pressure due to delayed customer payments may use a moratorium to:
- Pause creditor enforcement
- Continue trading
- Negotiate a restructuring agreement
- Implement a CVA to reduce debt burden
This allows time to stabilise operations without immediate liquidation pressure.
Common Questions
Is a moratorium the same as administration?
No. Administration involves control passing to an administrator, whereas a moratorium allows directors to remain in control under supervision.
Can creditors still be paid?
Yes, but only certain categories of debt must be paid during the moratorium. Others are paused temporarily.
Does it stop all legal action?
Most enforcement action is paused, but some proceedings may continue with court permission.
Can a moratorium guarantee company survival?
No. It is a protective mechanism, not a guarantee of rescue. Its success depends on the company's financial recovery plan.
Key Takeaways
An insolvency moratorium under Part A1 of the Insolvency Act 1986 provides temporary protection for financially distressed companies by preventing creditor enforcement while a rescue is attempted. It lasts initially for 20 business days and is supervised by an insolvency practitioner known as the monitor. The moratorium restricts legal action, provides a payment holiday for many pre-existing debts, and allows directors to continue managing the business. However, it is temporary and only effective if the company can realistically achieve financial recovery.
