Section 1A of The Insolvency Act 1986 - Company Voluntary Arrangements (CVAs)

What is a CVA Moratorium?

 

The heading to Section 1A of The Insolvency Act 1986 just says "Moratorium". So what is a moratorium?

 

In this particular instance a moratorium means no more than a legally imposed freeze on creditors being able to take enforcement action (eg bailiff action or winding up action) against the company concerned while a company voluntary arrangement is in prospect and before the creditors meeting called to consider the CVA proposal. Obtaining a moratorium on day one may be very important if a company is under severe financial threat in the period leading up to the creditors meeting to consider a CVA proposal..

 

The actual wording of Section 1A of The Insolvency Act 1986 is reproduced below in bold.

 

1A Moratorium

 

(1) Where the directors of an eligible company intend to make a proposal for a voluntary arrangement, they may take steps to obtain a moratorium for the company .

(Certain ineligible companies are listed at Paragraphs 4A to 4K of Schedule A1 to The Insolvency Act 1986 - While eligibility for a CVA with a moratorium is defined at Paragraphs 2 and 3 of Schedule A1)

 

(2) The provisions of Schedule A1 to this Act have effect with respect to -

(a) companies eligible for a moratorium under this section,

(b) the procedure for obtaining such a moratorium,

(c) the effects a of such a moratorium, and

 (d) the produre applicable (in place of sections 2 to 6 and 7) in relation to the approval and implementation of a voluntary arrangement where such a moratorium is or has been in force.

 

OK - what does this mean?

It means that there are two different types of CVA that could be put

forward as proposals to creditors:

- one with a moratorium;

 - and, one without a moratorium.

 

There is a different set of rules for each type of moratorium which are addressed

on this website at this link.

 

There is more red tape (and cost) involved in proposing and monitoring

a Section 1A type of Insolvency Act 1986 Company Voluntary Arrangement.

We can guide you as to what is best and cheapest for your company while

also providing the protection you require.

"Protection" of assets for instance can be achieved, without a CVA moratorium,

through a hivedown of assets in the critical period before the CVA creditors

meeting.