Lloyd's Maritime and Commercial Law Quarterly
The freestanding moratorium and its policy goals: a partial success
Natalie Mrockova*
Traditionally, the English corporate restructuring regime has been perceived as effective and well-functioning. Yet, in recent years, it has been under increasing pressure to become even more rescue-orientated and debtor-friendly. Consultation about possible changes began in 2010, but most of the work took place between 2016 and 2018. The Corporate Insolvency and Governance Act 2020 was hastily promulgated; it introduced new tools—some permanent, others temporary—to help rescue struggling but viable companies deal with the aftermath of the Covid-19 pandemic and also more generally. This article considers one of the permanent tools that the Act introduced: the freestanding moratorium. The new mechanism—which can be used alone or in combination with other existing options—has been criticised for its low use and limitations that arise from the carve-outs contained in the law. However, this article’s concern is whether it has at least fulfilled the goals set out by the Government during the consultation period. It examines the goals as explained in the consultation documents and compares them to the provisions of the law as implemented and the data on its use. It concludes that the new moratorium has been only partially successful in fulfilling the goals that the government set out, and several significant problems (that arise from this failure) remain. It argues that the law should be amended so as to align with the original goals, which would help address some of its limitations in practice.
I. INTRODUCTION
The English restructuring landscape has undergone many changes in the past four decades. A modern framework for dealing with insolvent companies was introduced in the Insolvency Act 1986, in response to a thorough review and recommendations in the Cork Report1 in 1982. The law produced four main insolvency procedures: liquidation (for realisation and orderly distribution of assets), administration (for collective rescue or better-than-liquidation arrangements), company voluntary arrangements (“CVAs”, for selective restructuring) and administrative receivership (for security realisation).2
* Lecturer in Law, Merton College, Oxford.
1. Report of the Review Committee on Insolvency Law and Practice (Cmnd 8558, 1982), led by Sir Kenneth Cork.
2. There were also the schemes of arrangements (“SoAs”), first introduced in 1862 and now contained in the Companies Act 2006: see J Payne, Schemes of Arrangement: Theory, Structure and Operation (Cambridge, 2014), ch.1.
The freestanding moratorium policy goals
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