The economic viability of the standalone restructuring moratorium

The inclusion of a statutory moratorium (or stay) has been a consistent feature in restructuring frameworks around the world. Imposing a statutory moratorium on legal proceedings affords companies in financial difficulty with time to formulate potential restructuring measures and seek new investment arrangements, with a view to facilitating a rescue of the company as a going concern. During a moratorium, companies are afforded the necessary breathing space free from the threat of hostile creditor action. Without a moratorium, creditors can easily disrupt the restructuring efforts by repossessing assets which may result in the dissipation of assets required to facilitate a successful rescue attempt.

The Corporate Insolvency and Governance Act 2020 has since introduced a new standalone restructuring moratorium as part of the permanent changes to the UK’s insolvency framework. In certain circumstances, an eligible company can obtain a moratorium where the monitor thinks it is likely that a moratorium would result in the rescue of the company as a going concern. As will be discussed, the self-standing moratorium on enforcement action promotes company rescue as opposed to business rescue. To this end, the standalone moratorium represents a fundamental shift for the UK insolvency framework whereby a more debtor-focused approach rather than a creditor-focused approach is implemented. This paper will consider the economic viability of a successful rescue under the application of the standalone moratorium. In doing so, this paper will examine the associated issues attached to the Part A1 moratorium, such as perennial costs, limitations in the eligibility criteria, and the substantive barriers of seeking value in the going concern.