Guidance on insolvency moratorium process

Government issues detailed guidance on insolvency moratorium process

The government has today provided detailed guidance for the UK’s version of the Chapter 11 process we have seen utilised extensively in the USA by companies such as General Motors to buy time whilst a company in financial difficulty agrees on a restructuring deal. The Bill received royal assent on 25^th June and is designed to relieve the burden on businesses and support economic recovery.

Mike Jones, Chairman of ASE commented “this act will provide much-needed breathing space for businesses in financial difficulty as a result of the Covid pandemic. Whilst we would always recommend communication and agreement with creditors as the first port of call, these measures will buy time for businesses to get their funding and plans in place, without the imminent threat of being wound up. We have seen this practice work very successfully in the USA and, whilst we hope businesses won’t require it, this Act provides a useful safety net.”

There are a large number of documents on the gov.uk website, however the overall process is summarised simply in the diagram below, which is taken from the draft guidance for monitors:

 

The details of the overall bill can be found at

https://www.gov.uk/government/news/government-introduces-legislation-to-relieve-burden-on-businesses-and-support-economic-recovery?utm_source=2eb97745-ee70-4ef7-8a47-a96433265320&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate#history

Details of how to apply for a moratorium, including links to all of the companies house forms are contained at 

https://www.gov.uk/guidance/applying-for-a-moratorium-under-the-corporate-insolvency-and-governance-act-2020?utm_source=a826c7e8-d43a-42a1-97f3-ad6bc902fbf5&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

Detailed guidance for monitors, including a 44-page guide, can be found at 

https://www.gov.uk/government/publications/insolvency-act-1986-part-a1-moratorium-draft-guidance-for-monitors

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