Statutory Moratorium
A Statutory Moratorium is a legal procedure which provides a period of breathing space for a company, during which creditors (including secured creditors) cannot take enforcement action.
Although it is for use by companies who are suffering financial difficulties it can only be used where a company is reasonably likely to be able to continue as a going concern (rather than requiring a formal insolvency process at some future point).
The procedure was only introduced in the summer of 2020, but it is likely to be most appropriate for companies who are under potentially critical pressure from creditors (such as a threat of a winding up petition or a secured creditor intending to appoint an administrator). In this scenario the moratorium protects the company from the hostile creditor action, providing time for it to resolve its financial issues (such as raising additional finance or negotiating a repayment plan with creditors).
A moratorium may only be used where it is likely that the company can be rescued and will meet liabilities which fall due during the moratorium. The directors stay in control but an Insolvency Practitioner (“IP”) acts as ‘monitor’.