Have your say: government proposes moratorium route for companies in trouble

The proposals - set out in a government consultation - will allow companies to apply to court for a moratorium stopping creditors from collecting their money where the company is seeking an agreed compromise, or a statutory compromise, such as a Company Voluntary Arrangement or Scheme of Arrangement. A company could only apply if, among other criteria:

• Its core business was viable.
• It was not already failing or insolvent.

Creditors would be able to be represented at the court hearing to sanction the moratorium and an authorised insolvency practitioner would be involved in key stages throughout, to protect their interests. It would initially last for three months, but this could be extended if negotiations, or the statutory compromise, were taking longer.

The directors would continue to manage the company but there would be additional duties and penalties to ensure their good behaviour.

Businesses have until 18 October 2010 to respond the consultation.

Recommendation
Download the consultation from the Insolvency Service website.