Rule 1.40 of The Insolvency Rules 1986 - Company Voluntary Arrangements (CVAs)

Notice and Advertisement of the beginning of a CVA moratorium period

 

Obtaining a court ordered freeze on creditors' enforcement actions, otherwise known as "moratorium", is a privilege for the company concerned - particularly when it is considered that the creditors of that company have not had an opportunity to say whether or not they agree to the freezing of their power to recover money due. Because of the benefit of the moratorium the company that obtained the CVA moratorium must, in accordance with Rule 1.40 of The Insolvency Rules 1986, advertise the fact of the beginning of the moratorium and file a notice with Registrar of Companies and give notice to certain creditors affected by the freeze. 

 

The actual wording of Rule 1.40 of The Insolvency Rules 1986 is reproduced below in bold.

 

Insolvency Rules 1986 - Rule 1.40 - Notice and advertisement of beginning of a moratorium

 

(1) After receiving the copies of the schedule endorsed by the court under Rule 1.39(3) , the directors shall [as soon as reasonably practicable] serve 2 of them on the nominee and one on the company.

(2) On receipt of the copies of the schedule pursuant to paragraph (1), the nominee— 

(a) as soon as reasonably practicable shall cause a notice of the coming into force of the moratorium to be gazetted; and

(b) may advertise the notice in such other manner as the nominee thinks fit.

(2A) In addition to the standard contents, the notice under paragraph (2) must state—

(a) the nature of the business of the company;

(b) that a moratorium under section 1A has come into force; and

(c) the date upon which the moratorium came into force

 

(3) The nominee shall [as soon as reasonably practicable] notify the registrar of companies, the company and any petitioning creditor of the company of whose address the nominee is aware of the coming into force of the moratorium and such notification shall specify the date on which the moratorium came into force and the court at which the documents to obtain the moratorium were filed. 

 

(4) The nominee shall give notice of the coming into force of the moratorium specifying the date on which it came into force to— 

(a) any [enforcement officer] or other officer who, to his knowledge, is charged with an execution or other legal process against the company or its property; and 

(b) any person who, to his knowledge, has distrained against the company or its property.

 

It should be noticed that Insolvency Rule 1.40 only makes it a positive requirement to advertise the beginning of the moratorium in the London Gazette (who reads the London Gazette!?) The Nominee has a discretion whether or not to advertise the beginning of the moratorium in a local, to the company, newspaper under this Rule. 

Rule 1.40 does not even say that all creditors must be notified of the beginning of the CVA moratorium (under this particular Rule) - but only those creditors who have issued a winding up petition or who are otherwise pursuing some other type of prescribed debt collection process.

 

In summary Insolvency Rule 1.40 makes it a requirement to advertise the beginning of the CVA moratorium in the London Gazette and file a similar notice with the Registrar of Companies.