Insolvency Service
launches consultation on proposals for a restructuring moratorium
The Insolvency
Service has today launched a twelve week consultation on proposals
for a new restructuring moratorium. The proposals would provide
company directors with the option of obtaining a protected
breathing space in which to negotiate with their creditors and
reorganise their business affairs, through a new statutory moratorium.
Launching the consultation, Edward Davey, Minister responsible
for the Insolvency Service, said:
“I encourage everyone with an interest in business finance and
restructuring to study the proposals for a restructuring
moratorium set out in this consultation. This is the time to make
your views count.
“Even large and otherwise successful businesses can find
themselves facing temporary difficulties, for example when they
have inherited very high levels of debt. These proposals are
intended to help them act early to resolve problems, safeguarding
jobs and promoting sustainable economic growth.”
The option of applying for a restructuring moratorium would be
available to companies that are seeking a contractual compromise,
or are preparing a statutory compromise proposal – either a
Company Voluntary Arrangement or a Scheme of Arrangement. For
companies that were failing or were already insolvent, existing
insolvency procedures (including administration or liquidation)
would continue to apply.
The consultation can be found at http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/RestructuringMoratoriumConsultationDocument.pdf
and invites stakeholders and other interested parties to
review the proposals and respond to The Insolvency Service with
any comments, which will be taken into consideration by the Minister.
Notes to Editors
1 The proposed restructuring moratorium would initially last for
three months, allowing a company to negotiate and agree terms of
the restructuring or compromise. An extension of this period would
be available for more complex negotiations, or even where further
time was required for the approval of a statutory compromise proposal.
2 The effect of a moratorium is to temporarily prevent creditors
taking action against the company to recover their debts, for
example by petitioning for seeking to have the company wound up,
by enforcing contractual security rights, or landlords
repossessing their premises.
3 In order to help safeguard creditors’ interests, the directors’
application for a moratorium would be sanctioned at a court
hearing during which creditors would be able to be represented. An
authorised insolvency practitioner would also be involved at
certain key stages of the application process, and in helping to
safeguard the interests of creditors whilst the moratorium was in
force.
4 At present, a moratorium is only available outside of the
administration procedure for small companies with a proposal for a
company voluntary arrangement (a statutory mechanism for the
company achieving a legally binding compromise with its
creditors). It is not available to large companies or to companies
using other restructuring procedures.
5 Vince Cable and George Osborne launched the ‘Financing a
Private Sector Recovery’ on 26 July 2010 to encourage an industry
led recovery by addressing the problems businesses face accessing
finance. The press notice can be found at http://www.bis.gov.uk/newsroom
6 The consultation can be found at http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/RestructuringMoratoriumConsultationDocument.pdf
and runs from 26 July until 18 October 2010.
7 The Insolvency Service administers the insolvency regime,
investigating all compulsory liquidations and individual
insolvencies (bankruptcies) through the Official Receiver to
establish why they became insolvent. The Service also authorises
and regulates the insolvency profession; deals with
disqualification of directors in corporate failures; assesses and
pays statutory entitlement to redundancy payments when an employer
cannot or will not pay employees; provides banking and investment
services for bankruptcy and liquidation estate funds; and advises
ministers and other government departments on insolvency law and
practice. Further information about the work of The Insolvency
Service is available from http://www.insolvency.gov.uk
Contacts:
Denise Rawls.
Phone: 020 7674 6910
denise.rawls@insolvency.gsi.gov.uk
Ade Daramy
Phone: 020 7596 6187
ade.daramy@insolvency.gsi.gov.uk