Chapter 6CompaniesCompanies involved in financial markets such as stock-
brokers, where existing law is designed to ensure that
financial markets continue to function in the event of
the insolvency of one or more of the participants, are
excluded. Also excluded are companies already subject
to formal insolvency proceedings as where a winding-up
is in progress or where a moratorium has been tried and
failed in the previous 12 months. The main provisions
are set out below:
1 Nominee’s statement. Directors who want a morato-
rium must appoint a nominee, normally an insolvency
practitioner, and provide the nominee with the follow-
ing information:
■a document setting out the terms of the proposed
CVA;
■a statement of affairs giving details of the company’s
assets, debts and other liabilities together with any
other information that the nominee may request.
2 Documents to be submitted to the court. If the
nominee considers that the proposal has a reasonable
prospect of success in terms of being approved and
implemented and that sufficient funding is available and
that meetings of the company and creditors should be
called, he must provide the directors with a statement to
that effect. In order to obtain a moratorium, the direc-
tors must file certain documents with the court; mainly
the terms of the proposed CVA, the statement of affairs
and the nominee’s statement.
3 Duration of the moratorium. The moratorium
comes into effect when the documents referred to above
are filed with the court. The initial period is 28 days. A
meeting of the company and of the creditors held within
the initial period may decide to extend the moratorium
by up to a further two months. The moratorium may be
brought to an end by a decision of the meetings of the
company and of creditors to approve a CVA. Alternat-
ively, it may be brought to an end:
■by the court;
■by the withdrawal of the nominee of his consent to
act;
■by a decision of the meetings of members and of cred-
itors that the CVA should not be approved;
■at the end of the 28-day minimum period if both of
the first meetings of the company and of the creditors
has not taken place;
■if there is no decision of the above meetings to extend it.
4 Members and creditors: conflicting decisions.In
this situation the decision of the creditors prevails but a
member may apply to the court for an order that the
members’ decision should prevail. This is a matter for
the court’s discretion and the court may make any order
it thinks fit.5 Notification of the moratorium. When the morato-
rium comes into force and when it ends the nominee is
required by the Insolvency Rules 1986 (SI 1986/1925) to
advertise that fact, to notify the Registrar of Companies
and to give an official notice to the company. When
the moratorium comes into force he must notify any
creditor who has petitioned for a winding-up; and when
it ends he must notify any creditor of whose claim he is
aware.6 Effect of the moratorium on creditors.Other than
for an ‘excepted petition’, i.e. a petition by the Secretary
of State that winding-up is in the public interest, no
petition to wind up the company nor any other insol-
vency proceedings can be commenced. No steps may be
taken to enforce any security over the company’s prop-
erty or repossess any goods in the company’s possession
under any hire-purchase agreement or on retention; nor
can any other proceedings be commenced or continued.
Existing winding-up petitions cannot proceed.7 Obtaining credit. During the moratorium the company
may not obtain credit to the value of £250 or more without
first telling the person giving the credit that a morato-
rium is in force. This includes payments in advance for
the supply of goods and services. The company’s officers
commit a criminal offence if they breach these rules.8 Disposals and payments. While the moratorium is in
force the company may only dispose of any of its prop-
erty or pay a debt that existed at the start of the morato-
rium if there are reasonable grounds for believing that
it will benefit the company and the moratorium com-
mittee (see below) gives approval. If there is no committee,
approval must be given by the nominee. This does not
prevent the sale of property in the ordinary course of
business as where a farming supplies company sells feed
as part of its trade. Officers of the company commit an
offence on breach of the above rules.9 Disposal of charged property. So as not to inhibit a
company rescue where it may be necessary to sell the
undertaking or part of it, the Insolvency Act 2000 allows
the disposal by the company during the moratorium of197