Insolvency Act 1986
1986 c. 45
An Act to consolidate the enactments relating to company insolvency and winding up (including the winding up of companies that are not insolvent, and of unregistered companies); enactments relating to the insolvency and bankruptcy of individuals; and other enactments bearing on those two subject matters, including the functions and qualification of insolvency practitioners, the public administration of insolvency, the penalisation and redress of malpractice and wrongdoing, and the avoidance of certain transactions at an undervalue
[25th July 1986]
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
(1) This Part contains provision that enables an eligible company, in certain circumstances, to obtain a moratorium, giving it various protections from creditors set out in this Part.
(2) In this Chapter section A2 introduces Schedule ZA1 (which defines what is meant by an “eligible” company).
(3) Chapter 2 sets out how an eligible company may obtain a moratorium.
(4) Chapter 3 sets out for how long a moratorium has effect.
(5) Chapter 4 sets out the effects of a moratorium on the company and its creditors.
(6) Chapter 5 contains provision about the monitor.
(7) Chapter 6 contains provision about challenges.
(8) Chapter 7 contains provision about certain offences.
(9) Chapter 8 contains miscellaneous and general provision, including—
(a) special provision for certain kinds of company;
(b) definitions for the purposes of this Part;
(c) provision about regulations under this Part.
A3 Obtaining a moratorium by filing or lodging documents at court
(1) This section applies to an eligible company that—
(a) is not subject to an outstanding winding-up petition, and
(b) is not an overseas company.
(2) The directors of the company may obtain a moratorium for the company by filing the relevant documents with the court (for the relevant documents, see section A6).
(3) For the purposes of this Chapter a company is “subject to an outstanding winding-up petition” if—
(a) a petition for the winding up of the company has been presented, and
(b) the petition has not been withdrawn or determined.
A4 Obtaining a moratorium for company subject to winding-up petition
(1) This section applies to an eligible company that is subject to an outstanding winding-up petition.
(2) The directors of the company may apply to the court for a moratorium for the company.
(3) The application must be accompanied by the relevant documents (for the relevant documents, see section A6).
(4) On hearing the application the court may—
(a) make an order that the company should be subject to a moratorium, or
(b) make any other order which the court thinks appropriate.
(5) The court may make an order under subsection (4)(a) only if it is satisfied that a moratorium for the company would achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being subject to a moratorium).
A5 Obtaining a moratorium for other overseas companies
(1) This section applies to an eligible company that—
(a) is not subject to an outstanding winding-up petition, and
(b) is an overseas company.
(2) The directors of the company may apply to the court for a moratorium for the company.
(3) The application must be accompanied by the relevant documents (for the relevant documents, see section A6).
(4) On hearing the application the court may—
(a) make an order that the company should be subject to a moratorium, or
(b) make any other order which the court thinks appropriate.
(1) For the purposes of this Chapter, “the relevant documents” are—
(a) a notice that the directors wish to obtain a moratorium,
(b) a statement from a qualified person (“the proposed monitor”) that the person—
(i) is a qualified person, and
(ii) consents to act as the monitor in relation to the proposed moratorium,
(c) a statement from the proposed monitor that the company is an eligible company,
(d) a statement from the directors that, in their view, the company is, or is likely to become, unable to pay its debts, and
(e) a statement from the proposed monitor that, in the proposed monitor’s view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern.
(2) Where it is proposed that more than one person should act as the monitor in relation to the proposed moratorium—
(a) each of them must make a statement under subsection (1)(b), (c) and (e), and
(b) the statement under subsection (1)(b) must specify—
(i) which functions (if any) are to be exercised by the persons acting jointly, and
(ii) which functions (if any) are to be exercised by any or all of the persons.
(3) The rules may make provision about the date on which a statement comprised in the relevant documents must be made.
(4) The Secretary of State may by regulations amend this section for the purposes of adding to the list of documents in subsection (1).
(5) Regulations under subsection (4) are subject to the affirmative resolution procedure.
A7 Beginning of moratorium and appointment of monitor
(1) A moratorium for a company comes into force at the time at which—
(a) in the case of a company to which section A3 applies, the relevant documents are filed with the court under subsection (2) of that section;
(b) in the case of a company to which section A4 applies, an order is made under section A4(4)(a);
(c) in the case of a company to which section A5 applies, an order is made under section A5(4)(a).
(2) On the coming into force of a moratorium, the person or persons who made the statement mentioned in section A6(1)(b) become the monitor in relation to the moratorium.
A8 Obligations to notify where moratorium comes into force
(1) As soon as reasonably practicable after a moratorium for a company comes into force, the directors must notify the monitor of that fact.
(2) As soon as reasonably practicable after receiving a notice under subsection (1), the monitor must notify the following that a moratorium for the company has come into force—
(a) the registrar of companies,
(b) every creditor of the company of whose claim the monitor is aware,
(c) in a case where the company is or has been an employer in respect of an occupational pension scheme that is not a money purchase scheme, the Pensions Regulator, and
(d) in a case where the company is an employer in respect of such a pension scheme that is an eligible scheme within the meaning given by section 126 of the Pensions Act 2004, the Board of the Pension Protection Fund.
(3) A notice under subsection (2) must specify—
(a) when the moratorium came into force, and
(b) when, subject to any alteration under or by virtue of any of the provisions mentioned in section A9(3) or (4), the moratorium will come to an end.
(4) If the directors fail to comply with subsection (1), any director who did not have a reasonable excuse for the failure commits an offence.
(5) If the monitor without reasonable excuse fails to comply with subsection (2), the monitor commits an offence.
(1) A moratorium ends at the end of the initial period unless it is extended, or comes to an end sooner, under or by virtue of a provision mentioned in subsection (3) or (4).
(2) In this Chapter “the initial period”, in relation to a moratorium, means the period of 20 business days beginning with the business day after the day on which the moratorium comes into force.
(3) For provision under or by virtue of which a moratorium is or may be extended, see—
section A10 (extension by directors without creditor consent);
section A11 (extension by directors with creditor consent);
section A13 (extension by court on application of directors);
section A14 (extension while proposal for CVA pending);
section A15 (extension by court in course of other proceedings).
(4) For provision under or by virtue of which the moratorium is or may be terminated, see—
section A16 (termination on entry into insolvency procedure etc);
section A38 (termination by monitor);
section A42 or A44 (termination by court).
(5) A moratorium may not be extended under a provision mentioned in subsection (3) once it has come to an end.
(6) Where the application of two or more of the provisions mentioned in subsections (3) and (4) would produce a different length of moratorium, the provision that applies last is to prevail (irrespective of whether that results in a shorter or longer moratorium).
A10 Extension by directors without creditor consent
(1) During the initial period, but after the first 15 business days of that period, the directors may extend the moratorium by filing with the court—
(a) a notice that the directors wish to extend the moratorium,
(b) a statement from the directors that all of the following that have fallen due have been paid or otherwise discharged—
(i) moratorium debts, and
(ii) pre-moratorium debts for which the company does not have a payment holiday during the moratorium (see section A18),
(c) a statement from the directors that, in their view, the company is, or is likely to become, unable to pay its pre-moratorium debts, and
(d) a statement from the monitor that, in the monitor’s view, it is likely that the moratorium will result in the rescue of the company as a going concern.
(2) The rules may make provision about the date on which a statement mentioned in subsection (1) must be made.
(3) On the filing with the court of the documents mentioned in subsection (1), the moratorium is extended so that it ends at the end of the period—
(a) beginning immediately after the initial period ends, and
(b) ending with the 20th business day after the initial period ends.
(1) At any time after the first 15 business days of the initial period the directors may, if they have obtained creditor consent, extend the moratorium by filing with the court—
(a) a notice that the directors wish to extend the moratorium,
(b) a statement from the directors that all of the following that have fallen due have been paid or otherwise discharged—
(i) moratorium debts, and
(ii) pre-moratorium debts for which the company does not have a payment holiday during the moratorium (see section A18),
(c) a statement from the directors that, in their view, the company is, or is likely to become, unable to pay its pre-moratorium debts,
(d) a statement from the monitor that, in the monitor’s view, it is likely that the moratorium will result in the rescue of the company as a going concern, and
(e) a statement from the directors that creditor consent has been obtained, and of the revised end date for which that consent was obtained.
(2) The rules may make provision about the date on which a statement mentioned in subsection (1) must be made.
(3) On the filing with the court of the documents mentioned in subsection (1), the moratorium is extended so that it ends with the revised end date mentioned in the statement under subsection (1)(e).
(4) A moratorium may be extended under this section more than once.
A12 Creditor consent for the purposes of section A11
(1) References in section A11 to creditor consent are to the consent of pre-moratorium creditors to a revised end date for the moratorium.
(2) The decision as to consent is to be made using a qualifying decision procedure.
(3) The revised end date must be a date before the end of the period of one year beginning with the first day of the initial period.
(4) In this section “pre-moratorium creditor” means a creditor in respect of a pre-moratorium debt—
(a) for which the company has a payment holiday during the moratorium (see section A18), and
(b) which has not been paid or otherwise discharged.
(5) In determining for the purposes of subsection (4) what counts as a pre-moratorium debt for which the company has a payment holiday during the moratorium, sections A18(3) and A53(1)(b) apply as if the references to the moratorium were to the moratorium as proposed to be extended.
(6) The Secretary of State may by regulations amend this section for the purposes of changing the definition of “pre-moratorium creditor”.
(7) Regulations under subsection (6) are subject to the affirmative resolution procedure.
A13 Extension by court on application of directors
(1) At any time after the first 15 business days of the initial period, the directors may apply to the court for an order that the moratorium be extended.
(2) The application must be accompanied by—
(a) a statement from the directors that all of the following that have fallen due have been paid or otherwise discharged—
(i) moratorium debts, and
(ii) pre-moratorium debts for which the company does not have a payment holiday during the moratorium (see section A18),
(b) a statement from the directors that, in their view, the company is, or is likely to become, unable to pay its pre-moratorium debts,
(c) a statement from the directors as to whether pre-moratorium creditors (as defined by section A12(4) and (5)) have been consulted about the application and if not why not, and
(d) a statement from the monitor that, in the monitor’s view, it is likely that the moratorium will result in the rescue of the company as a going concern.
(3) The rules may make provision about the date on which a statement mentioned in subsection (2) must be made.
(4) On hearing the application the court may—
(a) make an order that the moratorium be extended to such date as is specified in the order, or
(b) make any other order which the court thinks appropriate.
(5) In deciding whether to make an order under subsection (4)(a) the court must, in particular, consider the following—
(a) the interests of pre-moratorium creditors, as defined by section A12(4) and (5), and
(b) the likelihood that the extension of the moratorium will result in the rescue of the company as a going concern.
(6) Subsection (7) applies where—
(a) an application under this section is made, and
(b) apart from that subsection, the moratorium would end at a time before the application has been disposed of.
(7) The moratorium—
(a) does not end at the time mentioned in subsection (6)(b), and
(b) instead, ends—
(i) in a case in which the court makes an order under subsection (4)(a), in accordance with the order;
(ii) otherwise, when the application is withdrawn or disposed of.
(8) A moratorium may be extended under this section more than once.
(1) Subsection (2) applies where—
(a) at any time, the directors make a proposal under Part 1 (company voluntary arrangements), and
(b) apart from that subsection, the moratorium would end at a time before the proposal is disposed of.
(2) The moratorium—
(a) does not end at the time mentioned in subsection (1)(b), and
(b) instead, ends when the proposal is disposed of.
(3) For the purposes of this section a proposal under Part 1 is “disposed of” when any of the following takes place—
(a) the company and its creditors both decide under section 4 not to approve the voluntary arrangement contained in the proposal;
(b) the decisions taken by the company and its creditors under section 4 differ, and—
(i) the period for making an application under section 4A(3) expires and either no application has been made within that period or any application made within that period has been withdrawn, or
(ii) an application is made under section 4A(3) and that application is disposed of, or it is withdrawn after the expiry of the period for making an application under section 4A(3);
(c) the voluntary arrangement contained in the proposal takes effect under section 5;
(d) the proposal is withdrawn.
A15 Extension by court in the course of other proceedings
(1) Subsection (2) applies where—
(a) an application is made under section 896 or 901C(1) of the Companies Act 2006 (arrangements and reconstructions: court order for holding of meeting) in respect of a company, and
(b) during proceedings before a court in connection with the application, a moratorium for the company is in force.
(2) The court may make an order that the moratorium be extended to such date as is specified in the order.
(1) A moratorium comes to an end at any time at which the company—
(a) enters into a compromise or arrangement (see subsection (2)), or
(b) enters into a relevant insolvency procedure (see subsection (3)).
(2) For the purposes of this section a company enters into a compromise or arrangement if an order under section 899 or 901F of the Companies Act 2006 (court sanction for compromise or arrangement) comes into effect in relation to the company.
(3) For the purposes of this section a company enters into a relevant insolvency procedure if—
(a) a voluntary arrangement takes effect under section 5 in relation to the company,
(b) the company enters administration (within the meaning of Schedule B1 (see paragraph 1(2)(b) of that Schedule)),
(c) paragraph 44 of Schedule B1 (administration: interim moratorium) begins to apply in relation to the company, or
(d) the company goes into liquidation (see section 247).
A17 Obligations to notify change in end of moratorium
(1) The table imposes obligations on the directors of a company to notify the monitor where a moratorium for the company is extended or comes to an end.
Where a moratorium is extended or comes to an end under or by virtue of the following provision | the directors must
1 | Section A10 | Notify the monitor of the extension.
2 | Section A11 | Notify the monitor of the extension and of the revised end date.
3 | Section A13(4) | Notify the monitor of the extension and provide the monitor with the court order under section A13(4).
4 | Section A13(7)(a) | Notify the monitor of the extension.
5 | Section A13(7)(b)(ii) | Notify the monitor that the moratorium has come to an end and of the date that it ended.
6 | Section A14(2)(a) | Notify the monitor of the extension.
7 | Section A14(2)(b) | Notify the monitor that the moratorium has come to an end and of the date that it ended.
8 | Section A15 | Notify the monitor of the extension and provide the monitor with any court order under section A15.
9 | Section A16 | Notify the monitor that the moratorium has come to an end.
10 | Section A42 | Notify the monitor that the moratorium has come to an end and provide the monitor with the court order under section A42.
11 | Section A44 | Notify the monitor that the moratorium has come to an end and provide the monitor with the court order under section A44.
(2) After receiving a notice under subsection (1), other than a notice under entry 4 or 6 of the table, the monitor must notify the relevant persons of when the moratorium ended or, subject to any alteration under or by virtue of any of the provisions mentioned in section A9(3) or (4), the moratorium will come to an end.
(3) After receiving a notice under entry 4 or 6 of the table, the monitor must notify the relevant persons.
(4) If a moratorium comes to an end under section A38 (termination by monitor), the monitor must notify the company and the relevant persons of when the moratorium ended.
(5) The rules may—
(a) make further provision about the timing of a notice required to be given under this section;
(b) require a notice to be accompanied by other documents.
(6) If the directors fail to comply with subsection (1), any director who did not have a reasonable excuse for the failure commits an offence.
(7) If the monitor without reasonable excuse fails to comply with any of subsections (2) to (4), the monitor commits an offence.
(8) In this section “the relevant persons” means—
(a) the registrar of companies,
(b) every creditor of the company of whose claim the monitor is aware,
(c) in a case where the company is or has been an employer in respect of an occupational pension scheme that is not a money purchase scheme, the Pensions Regulator, and
(d) in a case where the company is an employer in respect of such a pension scheme that is an eligible scheme within the meaning given by section 126 of the Pensions Act 2004, the Board of the Pension Protection Fund.
A18 Overview and construction of references to payment holidays
(1) This Chapter makes provision about the main effects of a moratorium for a company.
(2) The provision made by this Chapter includes restrictions on the enforcement or payment of the debts that are defined by subsection (3) as pre-moratorium debts for which a company has a payment holiday during a moratorium.
(3) In this Part a reference to pre-moratorium debts for which a company has a payment holiday during a moratorium is to its pre-moratorium debts that have fallen due before the moratorium, or that fall due during the moratorium, except in so far as they consist of amounts payable in respect of—
(a) the monitor’s remuneration or expenses,
(b) goods or services supplied during the moratorium,
(c) rent in respect of a period during the moratorium,
(d) wages or salary arising under a contract of employment,
(e) redundancy payments, or
(f) debts or other liabilities arising under a contract or other instrument involving financial services.
(4) The rules may make provision as to what is, or is not, to count as the supply of goods or services for the purposes of subsection (3)(b).
(5) The Secretary of State may by regulations amend this section for the purposes of changing the list in subsection (3).
(6) Regulations under subsection (5) are subject to the affirmative resolution procedure.
(7) In this section—
“contract or other instrument involving financial services” has the meaning given by Schedule ZA2;
“monitor’s remuneration or expenses” does not include remuneration in respect of anything done by a proposed monitor before the moratorium begins;
“redundancy payment” means—
a redundancy payment under Part 11 of the Employment Rights Act 1996 or Part 12 of the Employment Rights (Northern Ireland) Order 1996, or
a payment made to a person who agrees to the termination of their employment in circumstances where they would have been entitled to a redundancy payment under that Part if dismissed;
“wages or salary” includes—
a sum payable in respect of a period of holiday (for which purpose the sum is to be treated as relating to the period by reference to which the entitlement to holiday accrued),
a sum payable in respect of a period of absence through illness or other good cause,
a sum payable in lieu of holiday, and
a contribution to an occupational pension scheme.
(1) During a moratorium, the company must, in any premises—
(a) where business of the company is carried on, and
(b) to which customers of the company or suppliers of goods or services to the company have access,
display, in a prominent position so that it may easily be read by such customers or suppliers, a notice containing the required information.
(2) During a moratorium, any websites of the company must state the required information.
(3) During a moratorium, every business document issued by or on behalf of the company must state the required information.
(4) For the purposes of subsections (1), (2) and (3), “the required information” is—
(a) that a moratorium is in force in relation to the company, and
(b) the name of the monitor.
(5) If subsection (1), (2) or (3) is contravened—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the contravention commits an offence.
(6) In this section “business document” means—
(a) an invoice,
(b) an order for goods or services,
(c) a business letter, and
(d) an order form,
whether in hard copy, electronic or any other form.
(1) During a moratorium—
(a) no petition may be presented for the winding up of the company, except by the directors,
(b) no resolution may be passed for the voluntary winding up of the company under section 84(1)(a),
(c) a resolution for the voluntary winding up of the company under section 84(1)(b) may be passed only if the resolution is recommended by the directors,
(d) no order may be made for the winding up of the company, except on a petition by the directors,
(e) no administration application may be made in respect of the company, except by the directors,
(f) no notice of intention to appoint an administrator of the company under paragraph 14 or 22(1) of Schedule B1 may be filed with the court,
(g) no administrator of the company may be appointed under paragraph 14 or 22(1) of Schedule B1, and
(h) no administrative receiver of the company may be appointed.
(2) Subsection (1)(a) does not apply to an excepted petition; and subsection (1)(d) does not apply to an order on an excepted petition.
(3) For these purposes, “excepted petition” means a petition under—
(a) section 124A, 124B or 124C, or
(b) section 367 of the Financial Services and Markets Act 2000 on the ground mentioned in subsection (3)(b) of that section.
A21 Restrictions on enforcement and legal proceedings
(1) During a moratorium—
(a) a landlord or other person to whom rent is payable may not exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company, except with the permission of the court,
(b) in Scotland, a landlord or other person to whom rent is payable may not exercise a right of irritancy in relation to premises let to the company, except with the permission of the court,
(c) no steps may be taken to enforce any security over the company’s property except—
(i) steps to enforce a collateral security charge (within the meaning of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979)),
(ii) steps to enforce security created or otherwise arising under a financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226)), or
(iii) steps taken with the permission of the court,
(d) no steps may be taken to repossess goods in the company’s possession under any hire-purchase agreement, except with the permission of the court, and
(e) no legal process (including legal proceedings, execution, distress or diligence) may be instituted, carried out or continued against the company or its property except—
(i) employment tribunal proceedings or any legal process arising out of such proceedings,
(ii) proceedings, not within sub-paragraph (i), involving a claim between an employer and a worker, or
(iii) a legal process instituted, carried out or continued with the permission of the court.
(2) An application may not be made for permission under subsection (1) for the purposes of enforcing a pre-moratorium debt for which the company has a payment holiday during the moratorium.
(3) An application may not be made for permission under subsection (1)(c), (d) or (e) with a view to obtaining—
(a) the crystallisation of a floating charge, or
(b) the imposition, by virtue of provision in an instrument creating a floating charge, of any restriction on the disposal of any property of the company.
(4) Permission of the court under subsection (1) may be given subject to conditions.
(5) Subsection (1)(c)(iii) is subject to section A23(1).
(6) In this section—
“agency worker” has the meaning given by section 13(2) of the Employment Relations Act 1999;
“employer”—
in relation to an agency worker, has the meaning given by section 13(2) of the Employment Relations Act 1999;
otherwise, has the meaning given by section 230(4) of the Employment Rights Act 1996;
“worker” means an individual who is—
a worker within the meaning of section 230(3) of the Employment Rights Act 1996, or
an agency worker.
(1) This section applies where there is an uncrystallised floating charge on the property of a company for which a moratorium is in force.
(2) During the moratorium, the holder of the floating charge may not give any notice which would have the effect of—
(a) causing the floating charge to crystallise, or
(b) causing the imposition, by virtue of provision in the instrument creating the charge, of any restriction on the disposal of property of the company.
(3) No other event occurring during the moratorium is to have the effect mentioned in subsection (2)(a) or (b).
(4) Subsection (5) applies where—
(a) the holder of a floating charge (“the chargee”) is prevented by subsection (2) from giving a notice mentioned there during the moratorium, and
(b) under the terms of the floating charge, the time for giving such a notice ends during the moratorium or before the chargee is given notice of the end of the moratorium under section A17.
(5) The chargee may give notice later than is required under the terms of the floating charge, but only if the chargee does so as soon as is practicable after—
(a) the end of the moratorium, or
(b) if later, the day on which the chargee is notified of the end of the moratorium.
(6) Where—
(a) subsection (3) prevents an event which occurs during the moratorium from having the effect mentioned there, and
(b) the holder of the floating charge gives notice of the event to the company as soon as is practicable after—
(i) the end of the moratorium, or
(ii) if later, the day on which the chargee is notified of the end of the moratorium,
the event is to be treated as if it had occurred when the notice was given.
(7) This section does not apply in relation to a floating charge that is—
(a) a collateral security (as defined by section A27);
(b) a market charge (as defined by section A27);
(c) a security financial collateral arrangement (within the meaning of regulation 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226));
(d) a system-charge (as defined by section A27).
A23 Enforcement of security granted during moratorium
(1) Security granted by a company during a moratorium in relation to the company may be enforced only if the monitor consented to the grant of security under section A26.
(2) See also section A21(1)(c), which restricts enforcement during a moratorium.
A24 Duty of directors to notify monitor of insolvency proceedings etc
(1) The directors of a company must notify the monitor before taking any of the following steps during a moratorium—
(a) presenting a petition for the winding up of the company;
(b) making an administration application in respect of the company;
(c) appointing an administrator under paragraph 22(2) of Schedule B1.
(2) The directors of a company must notify the monitor if, during a moratorium for the company, they recommend that the company passes a resolution for voluntary winding up under section 84(1)(b).
(3) The rules may make provision about the timing of a notice required to be given under subsection (1) or (2).
(4) If the directors fail to comply with subsection (1) or (2), any director who did not have a reasonable excuse for the failure commits an offence.
(1) During a moratorium, the company may not obtain credit to the extent of £500 or more from a person unless the person has been informed that a moratorium is in force in relation to the company.
(2) The reference to the company obtaining credit includes—
(a) the company entering into a conditional sale agreement in accordance with which goods are to be sold to the company,
(b) the company entering into any other form of hire-purchase agreement under which goods are to be bailed (in Scotland, hired) to the company, and
(c) the company being paid in advance (whether in money or otherwise) for the supply of goods or services.
(3) If a company contravenes subsection (1)—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the obtaining of the credit commits an offence.
(1) During a moratorium, the company may grant security over its property only if the monitor consents.
(2) The monitor may give consent under subsection (1) only if the monitor thinks that the grant of security will support the rescue of the company as a going concern.
(3) In deciding whether to give consent under subsection (1), the monitor is entitled to rely on information provided by the company unless the monitor has reason to doubt its accuracy.
(4) If the company grants security over its property during the moratorium otherwise than as authorised by subsection (1)—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the grant of the security commits an offence.
(5) For the consequences of a company granting security over its property in contravention of subsection (1), see also section A23.
(6) The monitor may not give consent under this section if the granting of security is an offence under section A27.
A27 Prohibition on entering into market contracts etc
(1) If a company enters into a transaction to which this section applies during a moratorium for the company—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the company to enter into the transaction commits an offence.
(2) A company enters into a transaction to which this section applies if it—
(a) enters into a market contract,
(b) enters into a financial collateral arrangement,
(c) gives a transfer order,
(d) grants a market charge or a system-charge, or
(e) provides any collateral security.
(3) Where during the moratorium a company enters into a transaction to which this section applies, nothing done by or in pursuance of the transaction is to be treated as done in contravention of any of sections A19, A21, A25, A26 and A28 to A32.
(4) In this section—
“collateral security” has the same meaning as in the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979);
“financial collateral arrangement” has the same meaning as in the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226);
“market charge” has the same meaning as in Part 7 of the Companies Act 1989;
“market contract” has the same meaning as in Part 7 of the Companies Act 1989;
“system-charge” has the meaning given by the Financial Markets and Insolvency Regulations 1996 (S.I. 1996/1469);
“transfer order” has the same meaning as in the Financial Markets and Insolvency (Settlement Finality) Regulations 1999.
A28 Restrictions on payment of certain pre-moratorium debts
(1) During a moratorium, the company may make one or more relevant payments to a person that (in total) exceed the specified maximum amount only if—
(a) the monitor consents,
(b) the payment is in pursuance of a court order, or
(c) the payment is required by section A31(3) or A32(3).
(2) In subsection (1)—
“relevant payments” means payments in respect of pre-moratorium debts for which the company has a payment holiday during the moratorium (see section A18);
“specified maximum amount” means an amount equal to the greater of—
£5000, and
1% of the value of the debts and other liabilities owed by the company to its unsecured creditors when the moratorium began, to the extent that the amount of such debts and liabilities can be ascertained at that time.
(3) The monitor may give consent under subsection (1)(a) only if the monitor thinks that it will support the rescue of the company as a going concern.
(4) In deciding whether to give consent under subsection (1)(a), the monitor is entitled to rely on information provided by the company unless the monitor has reason to doubt its accuracy.
(5) If the company makes a payment to which subsection (1) applies otherwise than as authorised by that subsection—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the payment commits an offence.
(1) During a moratorium, the company may dispose of its property only if authorised by subsection (2) or (5).
(2) In the case of property that is not subject to a security interest, the company may dispose of the property if—
(a) the disposal is made in the ordinary way of the company’s business,
(b) the monitor consents, or
(c) the disposal is in pursuance of a court order.
(3) The monitor may give consent under subsection (2)(b) only if the monitor thinks that it will support the rescue of the company as a going concern.
(4) In deciding whether to give consent under subsection (2)(b), the monitor is entitled to rely on information provided by the company unless the monitor has reason to doubt its accuracy.
(5) In the case of property that is subject to a security interest, the company may dispose of the property if the disposal is in accordance with—
(a) section A31(1), or
(b) the terms of the security.
(6) If the company disposes of its property during the moratorium otherwise than as authorised by this section—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the disposal commits an offence.
A30 Restrictions on disposal of hire-purchase property
(1) During a moratorium, the company may dispose of any goods in the possession of the company under a hire-purchase agreement only if the disposal is in accordance with —
(a) section A32(1), or
(b) the terms of the agreement.
(2) If the company disposes of goods in the possession of the company under a hire-purchase agreement otherwise than as authorised by subsection (1)—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the disposal commits an offence.
(1) During a moratorium, the company may, with the permission of the court, dispose of property which is subject to a security interest as if it were not subject to the security interest.
(2) The court may give permission under subsection (1) only if the court thinks that it will support the rescue of the company as a going concern.
(3) Where the court gives permission under subsection (1) other than in relation to a floating charge, the company must apply the following towards discharging the sums secured—
(a) the net proceeds of disposal of the property, and
(b) any money required to be added to the net proceeds so as to produce the amount determined by the court as the net amount which would be realised on a sale of the property in the open market by a willing vendor.
(4) Where the permission relates to two or more security interests, the condition in subsection (3) requires the application of money in the order of the priorities of the security interests.
(5) Where property subject to a floating charge is disposed of under subsection (1), the holder of the floating charge has the same priority in respect of acquired property as they had in respect of the property disposed of.
(6) In subsection (5) “acquired property” means property of the company which directly or indirectly represents the property disposed of.
(7) Where the court makes an order giving permission under subsection (1), the directors must, within the period of 14 days beginning with the date of the order, send a copy of it to the registrar of companies.
(8) If the directors fail to comply with subsection (7), any director who did not have a reasonable excuse for the failure commits an offence.
(9) Where property in Scotland is disposed of under subsection (1), the company must grant to the disponee an appropriate document of transfer or conveyance of the property, and—
(a) that document, or
(b) recording, intimation or registration of that document (where recording, intimation or registration of the document is a legal requirement for completion of title to the property),
has the effect of disencumbering the property of or, as the case may be, freeing the property from, the security interest.
(10) If a company fails to comply with subsection (3) or (9)—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the failure commits an offence.
(11) Subsection (1) does not apply in relation to any property which is subject to a financial collateral arrangement, a market charge, a system-charge or a collateral security (as defined by section A27).
(1) During a moratorium, the company may, with the permission of the court, dispose of goods which are in the possession of the company under a hire-purchase agreement as if all of the rights of the owner under the agreement were vested in the company.
(2) The court may give permission under subsection (1) only if the court thinks that it will support the rescue of the company as a going concern.
(3) Where the court gives permission under subsection (1), the company must apply the following towards discharging the sums payable under the hire-purchase agreement—
(a) the net proceeds of disposal of the goods, and
(b) any additional money required to be added to the net proceeds so as to produce the amount determined by the court as the net amount which would be realised on a sale of the goods in the open market by a willing vendor.
(4) If a company fails to comply with subsection (3)—
(a) the company commits an offence, and
(b) any officer of the company who without reasonable excuse authorised or permitted the failure commits an offence.
(5) Where the court makes an order giving permission under subsection (1), the directors must, within the period of 14 days beginning with the date of the order, send a copy of it to the registrar of companies.
(6) If the directors fail to comply with subsection (5), any director who did not have a reasonable excuse for the failure commits an offence.
(7) In Scotland, where goods in the possession of the company under a hire-purchase agreement are disposed of under subsection (1), the disposal has the effect of extinguishing, as against the disponee, all rights of the owner of the goods under the agreement.
A33 Contravention of certain requirements imposed under this Chapter
The fact that a company contravenes section A19 or any of sections A25 to A32 does not—
(a) make any transaction void or unenforceable, or
(b) affect the validity of any other thing.
(1) During a moratorium, the monitor must monitor the company’s affairs for the purpose of forming a view as to whether it remains likely that the moratorium will result in the rescue of the company as a going concern.
(2) In forming the view mentioned in subsection (1), the monitor is entitled to rely on information provided by the company, unless the monitor has reason to doubt its accuracy.
(1) The monitor may require the directors of the company to provide any information required by the monitor for the purpose of carrying out the monitor’s functions.
(2) The directors must comply with a requirement to provide information as soon as practicable.
(3) For the potential consequences of failing to comply with a requirement to provide information, see section A38.
(1) The monitor must bring a moratorium to an end by filing a notice with the court if—
(a) the monitor thinks that the moratorium is no longer likely to result in the rescue of the company as a going concern,
(b) the monitor thinks that the objective of rescuing the company as a going concern has been achieved,
(c) the monitor thinks that, by reason of a failure by the directors to comply with a requirement under section A36, the monitor is unable properly to carry out the monitor’s functions, or
(d) the monitor thinks that the company is unable to pay any of the following that have fallen due—
(i) moratorium debts;
(ii) pre-moratorium debts for which the company does not have a payment holiday during the moratorium (see section A18).
(2) The rules may provide for debts that are to be disregarded for the purposes of subsection (1)(d).
(3) On the filing with the court of a notice under subsection (1), the moratorium comes to an end.
(4) The rules may make provision about the timing of a notice required to be given under subsection (1).
(5) The Secretary of State may by regulations amend this section for the purposes of changing the circumstances in which the monitor must bring a moratorium to an end under subsection (1).
(6) Regulations under subsection (5) are subject to the affirmative resolution procedure.
(7) See also section A17 (obligations to notify change in end of moratorium).
A39 Replacement of monitor or appointment of additional monitor
(1) The court may make an order authorising the appointment of a qualified person to act as the monitor in relation to a moratorium instead of, or in addition to, a person who already acts as the monitor.
(2) The court may make an order providing that a person ceases to act as the monitor in relation to a moratorium.
(3) An order under subsection (1) or (2) may be made only on an application by the directors or the monitor.
(4) The court may make an order authorising the appointment of a monitor under subsection (1) only if the person has provided the court with a statement that the person—
(a) is a qualified person, and
(b) consents to act as the monitor in relation to the moratorium.
(5) Where it is proposed that more than one person should act as the monitor in relation to the moratorium, the statement under subsection (4) must specify—
(a) which functions (if any) are to be exercised by the persons acting jointly, and
(b) which functions (if any) are to be exercised by any or all of the persons.
(6) The rules may make provision about the date on which the statement under subsection (4) must be made.
(7) Where the court makes an order under subsection (1) or (2) the person begins to act as the monitor, or ceases to act as the monitor, in relation to the moratorium at the time specified in, or determined in accordance with, the order (“the relevant time”).
(8) As soon as reasonably practicable after the relevant time, the monitor must notify the following of the effect of the order—
(a) the registrar of companies,
(b) every creditor of the company of whose claim the monitor is aware,
(c) in a case where the company is or has been an employer in respect of an occupational pension scheme that is not a money purchase scheme, the Pensions Regulator, and
(d) in a case where the company is an employer in respect of such a pension scheme that is an eligible scheme within the meaning given by section 126 of the Pensions Act 2004, the Board of the Pension Protection Fund.
(9) If the monitor without reasonable excuse fails to comply with subsection (8), the monitor commits an offence.