A company moratorium is a formal, court-recognised breathing space that pauses most creditor action against an insolvent or financially distressed company for up to 40 business days, giving directors time to arrange a rescue. It was introduced as a standalone rescue tool by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) and sits alongside a company voluntary arrangement (CVA) and administration as one of the main formal routes available to directors.
Unlike the moratoriums that already existed inside administration, this one — often called the "Part A1 moratorium" after the part of the Insolvency Act 1986 it sits in — can be obtained on its own, without the company entering administration or liquidation. It is designed for businesses that are viable in the medium term but need protection from immediate creditor pressure while a rescue plan is put together.
What a standalone moratorium is and where it came from
The standalone moratorium was created by the Corporate Insolvency and Governance Act 2020, which inserted a new Part A1 into the Insolvency Act 1986. It came into force in June 2020, partly in response to the pandemic, but it remains a permanent part of UK insolvency law.
Before CIGA 2020, a company could only get moratorium-style protection by entering administration. The Part A1 moratorium changed that. It lets an eligible company obtain protection from creditors while the directors — not an administrator — stay in day-to-day control, supported by an independent insolvency practitioner called the monitor.
The protection a moratorium gives from creditor action
Once a moratorium is in place, most creditors cannot take enforcement action against the company without the court's permission. In practice this generally means:
- No winding-up petition can normally be presented or pursued against the company.
- No legal proceedings, execution or other legal process can be started or continued without leave of the court.
- Landlords cannot forfeit a lease by peaceable re-entry.
- Creditors cannot enforce most security over the company's assets.
This "creditor breathing space" is the central purpose of the moratorium: it stops the pressure escalating while the directors, working with the monitor, decide whether a CVA, a sale, refinancing or another rescue route is realistic.
Eligibility and which companies are excluded
Most private and public companies incorporated in the UK can apply, provided the directors reasonably believe the moratorium would rescue the company as a going concern. The directors file specified documents at Companies House, including statements confirming the company is, or is likely to become, unable to pay its debts, and that a moratorium would likely result in the company's rescue.
A number of company types are excluded or restricted from using the standalone moratorium, including:
- Companies already in an insolvency procedure such as administration or liquidation.
- Certain financial services firms, banks, insurers and entities involved in capital markets arrangements.
- Companies that have been in a moratorium or certain other insolvency procedures within the previous 12 months, subject to specific exceptions.
An insolvency practitioner will normally assess eligibility before a moratorium is filed, because the eligibility rules are detailed and getting them wrong can invalidate the protection. Government guidance on the Corporate Insolvency and Governance Act 2020 sets out the eligibility criteria in more detail.
The role of the monitor
Every moratorium must have a monitor — a licensed insolvency practitioner who oversees the process but does not take over management of the company. The directors remain in charge of running the business day to day.
The monitor's job is to:
- Confirm at the outset that the moratorium is likely to result in the company's rescue as a going concern.
- Monitor the company's affairs throughout the moratorium to check that rescue remains likely.
- End the moratorium early if it stops being likely to achieve rescue, or if other statutory grounds arise.
- File the required notices at Companies House and, where the moratorium is followed by another insolvency procedure, ensure the relevant notice is advertised in The Gazette.
Because a monitor must be a regulated insolvency practitioner, this is one of the points where Harbourfirst's role as an introducer becomes relevant — connecting a director with a practitioner who can assess and, where appropriate, act as monitor.
How long a company moratorium lasts and how it is extended
A standalone moratorium initially lasts for 20 business days. It can then be extended in a number of ways:
- By a further 20 business days with directors' consent alone, provided certain conditions are met.
- Up to one year in total with the consent of the company's creditors.
- Beyond that, or in other circumstances, with the permission of the court.
- Automatically for a short period if the company enters certain other insolvency procedures, such as proposing a CVA.
The monitor must keep confirming that rescue remains likely for the moratorium to continue. If that ceases to be the case, the monitor is obliged to bring the moratorium to an end.
Payment holidays and debts you must still pay during a moratorium
A moratorium is not a general debt freeze. Certain liabilities — described as "moratorium debts" and "priority pre-moratorium debts" — must still be paid as they fall due, including:
- The monitor's own fees and expenses.
- Rent for the period of the moratorium (though arrears from before it may be paused).
- Wages and salaries of employees, including redundancy payments falling due.
- Debts arising from certain financial contracts.
Other pre-moratorium debts can generally be paused during the moratorium itself, which is what creates the breathing space. Directors should expect the monitor to set out clearly, early on, which payments must continue and which are covered by the pause.
How a moratorium compares to a CVA and administration
A standalone moratorium is often a first step, not a final destination. It buys time; it does not restructure debt on its own. It typically leads on to one of the other formal routes:
- Company voluntary arrangement (CVA) — an agreement with creditors to repay debts over time, often proposed once a moratorium has stabilised the position.
- Administration — a formal procedure where an administrator takes control, used where a moratorium alone will not be enough to secure rescue or an orderly sale of the business.
- Doing nothing further — in some cases the breathing space is enough for directors to renegotiate directly with creditors and the moratorium simply ends once its purpose is served.
Because each route suits different circumstances, it is worth reading our overview of company insolvency options and which route is right before deciding how a moratorium fits into a wider plan.
Frequently asked questions
Can any company get a standalone moratorium?
No. Eligibility depends on the company's structure and recent insolvency history, and on the directors reasonably believing the moratorium would result in the company's rescue as a going concern. Some regulated financial entities are excluded.
Does a moratorium stop HMRC pursuing the company?
HMRC is generally treated like other creditors during a moratorium and is normally prevented from taking or continuing enforcement action without the court's permission, though ongoing tax debts still need to be addressed as part of the eventual rescue plan.
Who decides when a moratorium ends?
The monitor brings the moratorium to an end if rescue stops being likely, if the maximum permitted period is reached without further extension, or if the company moves into another insolvency procedure such as a CVA or administration.
Is a company moratorium the same as a CVA?
No. A moratorium is breathing space from creditor action; a CVA is a binding agreement to repay creditors over time. A moratorium can, but does not have to, lead into a CVA once the position is stabilised.
Do directors lose control of the company during a moratorium?
No. Directors continue to run the company day to day. The monitor oversees the process and confirms the moratorium remains appropriate, but does not manage the business in the way an administrator would.
This article is general information about the standalone moratorium under Part A1 of the Insolvency Act 1986 and is not legal, financial or insolvency advice. Every company's circumstances are different, and directors should speak to a regulated specialist about theirs.
If a moratorium sounds relevant to your situation, Harbourfirst can introduce you to a regulated insolvency practitioner who can assess your eligibility and options — start an enquiry.