Government business rescue moratorium proposal
The government has made an announcement that it is proposing a 3 month moratorium (see definition below) from creditor action for insolvent or near-insolvent companies.
R3 has welcomed this proposal having made their own suggestions previously. Andrew Tate, president of R3, the insolvency trade body had the following comments;
“R3 welcomes the government’s proposal to introduce a moratorium for struggling businesses to give them breathing space from creditor pressure. A moratorium could give company directors more time to turn a business around and negotiate with their creditors.”
“R3 has already published its own proposal for a business rescue moratorium and is pleased to see the government is following suit.”
“It’s very important that any moratorium is practical. It should be short, to make it easier to fund and to limit the burden on creditors, and there should be a licensed insolvency practitioner in place to look after creditors’ interests.”
“The government must also avoid repeating the mistakes of existing moratorium options and ensure the oversight role is proportionate.”
“R3’s own recommendation is for a 21 day long moratorium, extendable to 42 days with court approval and insolvency practitioner oversight. This should be long enough for a company to put in place a rescue plan and for it to bring creditors on board with what it is trying to do. A longer moratorium increases the risk of harm to creditors and could allow companies in the moratorium to ‘drift’ rather than sort their problems out.”
Isobel, Bretts Business Recovery also comments “whilst we view this positively it is important that, as licensed insolvency practitioners, we ensure that this isn’t just used as a tool to delay the inevitable and is not subjected to abuse, giving rogue directors time to manoeuvre assets out of the reach of creditors.”
To find out more about the proposed moratorium Click here
Moratorium Definition
A suspension of activity or an authorized period of delay or waiting.
A moratorium is sometimes agreed upon by the interested parties, or it may be authorized or imposed by operation of law. The term also is used to denote a period of time during which the law authorizes a delay in payment of debts or performance of some other legal obligation. This type of moratorium is most often invoked during times of distress, such as war or natural disaster.