Company Voluntary Arrangements with a moratorium - How long does the freeze on creditors' enforcement actions last?

Schedule A1 - Insolvency Act 1986 - Paragraph 8 - Duration of the moratorium period

 

 

It is a privilege for a court to permit your company to freeze all creditors' enforcement actions before those creditors have an opportunity to consider any Company Voluntary Arrangement that is being proposed. The length of time that that freeze will last for is detailed in Paragraph 8 of Schedule A1 to The Insolvency Act 1986 (which is reproduced below in bold.) The gist of the matter is that the freeze generally lasts until such time as the creditors meet to consider the CVA proposal. Paragraph 7 however also addresses more unusual circumstances such as the moratorium coming to an end if the nominee withdraws his consent at an earlier time. For example a nominee could withdraw his consent if in the moratorium period he came to the view that the company did not have sufficient available cash to finance its activities throughout the moratorium period.

 

 

Insolvency Act 1986 - Schedule A1 - Paragraph 8 - Duration of moratorium

 

(1) A moratorium comes into force when the documents for the time being referred to in paragraph 7(1) are filed or lodged with the court and references in this Schedule to “the beginning of the moratorium” shall be construed accordingly.

(2) A moratorium ends at the end of the day on which the meetings summoned under paragraph 29(1) are first held (or, if the meetings are held on different days, the later of those days), unless it is extended under paragraph 32.

(3) If either of those meetings has not first met before the end of the period of 28 days beginning with the day on which the moratorium comes into force, the moratorium ends at the end of the day on which those meetings were to be held (or, if those meetings were summoned to be held on different days, the later of those days), unless it is extended under paragraph 32.

(4) If the nominee fails to summon either meeting within the period required by paragraph 29(1), the moratorium ends at the end of the last day of that period.

(5) If the moratorium is extended (or further extended) under paragraph 32, it ends at the end of the day to which it is extended (or further extended).

(6) Sub-paragraphs (2) to (5) do not apply if the moratorium comes to an end before the time concerned by virtue of—

(a) paragraph 25(4) (effect of withdrawal by nominee of consent to act),

(b) an order under paragraph 26(3), 27(3) or 40 (challenge of actions of nominee or directors), or

(c) a decision of one or both of the meetings summoned under paragraph 29.

(7) If the moratorium has not previously come to an end in accordance with sub-paragraphs (2) to (6), it ends at the end of the day on which a decision under paragraph 31 to approve a voluntary arrangement takes effect under paragraph 36.

(8) The Secretary of State may by order increase or reduce the period for the time being specified in sub-paragraph (3).

 

How long does the freeze on creditors last when a CVA with a moratorium is proposed? The answer is found in Paragraph 8 of Schedule A1 to The Insolvency Act 1986.