Company Voluntary Arrangements (CVAs) - Law - CVA with a moratorium

Only certain defined companies are eligible to apply for a CVA with a moratorium under Schedule A1

Paragraph 2 of Schedule A1 to The Insolvency Act 1986 is one of a series of Paragraphs (Paragraphs 2 to 5) in CVA with a moratorium law that closely defines what type of companes are eligible, in that law, to apply for a CVA with a moratorium.

If you have a company that would benefit from a CVA and which needs an immediate freeze on creditors enforcements actions (otherwise known as a moratorium) you need not read the actual law - as the law (shown in bold below) is replete with cross references to other law. - We would be pleased to provide you with free advice in everyday language to answer the only question in which you might be interested - "Is my company eligible to apply & obtain a CVA with a moratorium"?

The actual wording of Paragraph 1 to Schedule A1 of The Insolvency Act 1986 is only reproduced below, in bold,  if you wish to do your own research on the "eligibility" requirements to apply for a CVA with a moratorium.

Paragraph 2 - Schedule A1 - Insolvency Act 1986 - CVAs with a moratorium - Eligibility

(1) A company is eligible for a moratorium if it meets the requirements of paragraph 3, unless—

(a) it is excluded from being eligible by virtue of paragraph 4, or

(b) it falls within sub-paragraph (2).

(2) A company falls within this sub-paragraph if—

[(a) it effects or carries out contracts of insurance, but is not exempt from the general prohibition, within the meaning of section 19 of the Financial Services and Markets Act 2000, in relation to that activity,

(b) it has permission under Part IV of that Act to accept deposits,

(bb) it has a liability in respect of a deposit which it accepted in accordance with the Banking Act 1979 (c. 37) or 1987 (c. 22),]

(c) it is a party to a market contract . . . or any of its property is subject to a market charge . . . or a system-charge, or

(d) it is a participant (within the meaning of the settlement finality regulations) or any of its property is subject to a collateral security charge (within the meaning of those regulations).

[(3) Paragraphs (a), (b) and (bb) of sub-paragraph (2) must be read with—

(a) section 22 of the Financial Services and Markets Act 2000;

(b) any relevant order under that section; and

(c) Schedule 2 to that Act.]

The main gist of the above Paragraph (Paragraph 2 of Schedule A1 to The Insolvency Act 1986) is that the main qualifying conditions to be eligible for a Company Voluntary Arrangement with a moratorium, and those excluded from applying, are;

• Found in Paragraphs 2 to 5 of Schedule A1 (reproduced on this website)

• In the main only "small" companies are eligible to apply for a CVA with a moratorium (with the word "small" in this connection being defined in The Companies Act 2006)

• Many types of company that are financial type businesses cannot promote a CVA with a moratorium (instead they would place their company into Administration to achieve the same "freeze on creditors" rather than propose a CVA With a moratorium)