The Part A1 moratorium: free-standing statutory breathing space

The moratorium is a directors-in-possession process: control is not surrendered to a practitioner. The monitor oversees rather than manages, ensuring the rescue objective remains achievable while the directors continue to operate the company. The mechanism sits alongside the longer-established procedures (administration, CVA, scheme of arrangement) and the new Part 26A restructuring plan.

Most companies are eligible, but several categories are excluded by Schedule ZA1 IA 1986:

• ›Banks, insurance companies, investment firms, and other regulated financial entities.
• ›Parties to capital market arrangements above £10 million.
• ›Public-private partnership project companies.
• ›Companies subject to an existing insolvency procedure (administration, CVL, liquidation).

There is also a 12-month look-back: a company that has used a Part A1 moratorium, entered an insolvency procedure, or been subject to a winding-up petition within the previous 12 months cannot enter a moratorium without leave of the court.

Out-of-court route

Where no petition is outstanding, directors file documents at court: a statement that the company is or is likely to become unable to pay its debts; a statement from the proposed monitor confirming consent to act, eligibility, and that in the monitor's view rescue as a going concern is likely; and the directors' statement of company eligibility.

Court route

Where a petition is outstanding, an application to court is required. The court must be satisfied that the moratorium would achieve a better outcome for creditors than winding up. In either case, the moratorium takes effect immediately on filing or order and lasts for 20 business days initially.

During the moratorium the company benefits from a wide statutory stay:

• ›No insolvency proceedings (administration application, winding-up petition) without permission of the court.
• ›No landlord forfeiture, no enforcement of security, no repossession under hire purchase, no legal process — all without court permission.
• ›Suppliers may not terminate contracts solely because the company entered a moratorium (CIGA also amended s.233B IA 1986 — the broader ipso facto ban).
• ›Crystallisation of floating charges is restricted; charges granted during the moratorium are subject to restrictions.

The company must add 'Moratorium — Company unable to pay debts' to its business documents, websites, and order forms.

The moratorium does not relieve the company of payment obligations falling due during the moratorium period. The company must continue to pay:

• ›Monitor's remuneration and expenses.
• ›Goods and services supplied during the moratorium.
• ›Rent for the moratorium period.
• ›Wages, salary, and redundancy payments.
• ›Debts under contracts involving financial services (loans, hedging arrangements) — a significant carve-out that affects strategic viability.

Pre-moratorium debts (with the exception of those listed above) are subject to a 'payment holiday' — they need not be paid, and enforcement is stayed. The carve-out for financial-services debt is the single most contentious feature in practice: bank debt, derivatives liabilities, and lease finance must continue to be serviced even during the moratorium.

The monitor is a licensed insolvency practitioner who oversees but does not displace the directors. The monitor must:

• ›Form a view at outset (and ongoing) that rescue of the company as a going concern remains likely.
• ›Bring the moratorium to an end where rescue is no longer likely, where moratorium debts cannot be met, or where directors fail to provide required information.
• ›Sanction transactions outside the ordinary course of business and grants of security.

Where the monitor concludes the rescue purpose is no longer achievable, termination is mandatory — there is no discretion to continue.

• ›Extended by a further 20 business days by the directors (with monitor consent and required filings) — total of 40 business days without creditor involvement.
• ›Extended for up to one year (less time already used) with creditor consent.
• ›Extended by the court for such period as the court considers appropriate.

Exit routes include: rescue achieved (refinancing completed, CVA approved, restructuring plan sanctioned, sale completed); termination by the monitor; entry into administration or liquidation if rescue fails.

• ›The financial-services debt carve-out limits utility for highly leveraged businesses.
• ›The directors-in-possession model is unfamiliar to UK lenders and counterparties, occasionally generating resistance.
• ›The 20-business-day initial window is short for complex restructurings.
• ›Where used effectively, the moratorium is often a precursor to a Part 26A restructuring plan or CVA, providing breathing space to crystallise the proposal.

For the principal restructuring partner procedure, see restructuring plan (Part 26A). For CVA, see company voluntary arrangement. For administration, see administration.

At IQ Insolvency, every engagement is led by a licensed insolvency practitioner from the first conversation. A Part A1 moratorium decision must rest on robust evidence of rescue viability — a moratorium entered without genuine prospects exposes directors to wasted costs and reputational damage. Call 020 8153 1270 for a confidential same-day conversation. No call centres. No handoffs.