The new Part A1 moratorium was introduced partly in response to the Covid-19 pandemic and its impact on businesses. The moratorium is not intended to be used to simply delay the inevitable insolvency of a company, but rather to allow breathing space for that company to restructure and/or achieve an effective rescue.
The new Part A1 moratorium was introduced partly in response to the COVID-19 pandemic and its impact on businesses. The moratorium is not intended to be used to simply delay the inevitable insolvency of a company, but rather to allow breathing space for that company to restructure and/or achieve an effective rescue.
A Part A1 moratorium (also referred to as a ‘standalone moratorium’) was introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) with effect from 26 June 2020. It is designed to allow financially distressed entities a short breathing space from enforcement action by certain types of creditors while they organise their affairs to make their rescue viable. It is a debtor-in-possession process meaning that directors remain in control of the company but are supervised by an insolvency practitioner acting as a monitor.
An important qualification on the effect of the moratorium is that it does not prevent enforcement action by financial creditors. Debts owed to such creditors that falls due during the moratorium must continue to be paid for the moratorium to remain in force. Moratorium debts (those incurred during the moratorium) and certain pre-moratorium debts (falling due during the moratorium but incurred before the moratorium – including rent for the period of the moratorium) must continue to be paid during the moratorium and it may be that the company obtains specific ‘debtor-in-possession’ funding to see it through that period.
The moratorium can be obtained through a court filing for an initial period of 20 business days (and can be extended by a further 20 business days) without creditor consent.
The moratorium will initially last 20 business days beginning with the business day after the day on which the moratorium comes into force (section A9(2), IA 1986) but it can be extended beyond 40 business days with creditor consent or the permission of the court.
Similar to the moratorium arising in an administration:
All "moratorium debts" and certain pre-moratorium debts will attract super-priority in the event of a subsequent liquidation or administration that commences within 12 weeks of the end of the moratorium. A financial services creditor that chooses to accelerate recovery of its debt will lose its super-priority status.
The temporary insolvency rules relaxing the entry requirements for a Part A1 moratorium have been extended until 30 September 2021 to permit that:
There is only one other form of moratorium that exists in an insolvency context and that applies when a company files a Notice of Intention to Appoint Administrators (in which case it is an initial ‘interim moratorium) or a Notice to Appoint Administrators.
A moratorium does not apply in Liquidation; that is a terminal procedure where the company is beyond rescue. In terms of creditor action against a company in liquidation there is an automatic stay of legal proceedings against the company or its assets meaning that a claimant would have to apply to court for permission before bringing or pursuing proceedings (this does not extend to the enforcement of security or the forfeiture of a lease).
The previous "small companies" moratorium available to companies considering a CVA context was repealed with effect from 26 June 2020 and has effectively been replaced by the Part A1 Moratorium.
We advise insolvency practitioners and companies in respect of the different moratoriums available and all other aspects of corporate insolvency. Please contact us to find out more.
In this session, we examined the legal framework around grant funded collaborations and discussed the key risks to be aware of, including IP ownership and compliance with grant terms.
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Created at the end of the Brexit transition period, Retained EU Law is a category of domestic law that consists of EU-derived legislation retained in our domestic legal framework by the European Union (Withdrawal) Act 2018. This was never intended to be a permanent arrangement as parliament promised to deal with retained EU law through the Retained EU Law (Revocation and Reform) Bill (the “Bill”).
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Browne Jacobson has bolstered its commercial practice in the UK with the appointment of commercial contracts and international trade specialist, Emma Roake, into its City-based London team.
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The Digital Markets Act (the “DMA”) joins the dots between competition law and data protection law and actively targets data-driven platforms. It is also a comprehensive regulation to take note of, with familiar GDPR-style fines tied to turnover.
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Rolls-Royce has shortlisted six locations for its first factory for small nuclear power stations. We look at the impact on regions & local businesses
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The Court of Appeal has dismissed two cases regarding rent arrears accrued during the Covid lockdowns. The cases are London Trocadero (2015) LLP v Picturehouse Cinemas Ltd and Bank of New York Mellon (International) Ltd v Cine-UK Ltd.
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The Court of Appeal overturned the “fire and re-hire” injunction, finding that there was nothing in the express contractual provisions preventing Tesco from giving the notice to terminate employment in the usual way.
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Browne Jacobson have successfully advised the partners of leading accountancy firm Cooper Parry on the agreement for Dutch based firm, Waterland Private Equity to invest in the business.
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Browne Jacobson’s corporate tech lawyers have advised specialist bicycle insurer Laka on an investment from Porsche Ventures (a venture capital division of Porsche AG), bringing its series A investment round to a total of $13.5m.
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There is currently no legislation requiring employees within the UK to have the COVID-19 vaccine. However, a recent Acas survey found that approximately 22% of employers intend to require their new staff to have the COVID-19 vaccination, and 21% would require their existing staff to be vaccinated too.
Browne Jacobson’s corporate finance team is celebrating after winning the prestigious “Corporate Law Firm of the Year’ award at this year’s East Midlands Dealmakers Awards.
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