Welcome to the Trowers & Hamlins Insolvency Bulletin. In this edition, we focus on moratoria.
The Corporate Insolvency & Governance Act 2020 (CIGA) introduced the standalone Part A1 Moratorium for companies. Since its introduction, only 59 companies have had a Part A1 Moratorium approved (in the period 26 June 2020 – 31 December 2024). In comparison, after the introduction of The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the Regulations) came into force on 4 May 2021, there has been much more significant uptake of standalone moratoria by individuals. In the period from introduction to 31 December 2024, over 277,000 individuals have obtained a standard breathing space under the Regulations, and 4,481 individuals have obtained a mental health breathing space under the Regulations.
Why has there been such a difference in uptake? As Navinder Grover and Adam Berman covered in their 2021 article, a Part A1 Moratorium does not provide a company with protection from all of its debts, and there is a lack of guidance within CIGA as to the responsibilities of the Monitor. They correctly predicted that such issues would cause a reluctance to use this process. Since then, there has been some limited guidance from the Court. Navinder Grover and Robyn Engstrom share lessons from a matter in which an application was made when the relevant company was subject to a winding up petition. Adam Berman re-visits the main advantages and disadvantages, and analyses the decision in Minor Hotel Group MEA DMCC v Dymant which provides guidance on how monitors should exercise their responsibilities, including when the Part A1 Moratorium should be terminated.
The standard breathing space for individuals under the Regulations has been very popular as can be seen from the volume of these breathing spaces granted, at an average rate of around per month. No insolvency practitioner is required for an application; it must simply be made via a debt advisor authorised to do so. A key feature is that most unsecured institutional debts will be qualifying debt, and each lasts for up to 60 days. Despite the high uptake, and maybe because of the relatively short duration of these standard breathing spaces, there have been limited reported decisions. Harvey Lavis sets out the approach taken in Carter v Davies & Ors, when the Court considered an application to annul a bankruptcy order which had been made notwithstanding a standard breathing space having been in place at the time. Mental health breathing spaces are far fewer in number, given the requirement for the debtor to be receiving crisis mental health treatment, and for an approved mental health professional to provide certification of this treatment. The mental health breathing space lasts for the duration of the crisis treatment, plus 30 days. There is a growing body of authorities covering challenges to breathing spaces, as covered by Katie Farmer.
More widely, Anamitra Mukhopadhyay, who joined the Trowers Restructuring & Insolvency team in the London office in January, discusses Cargologicair Ltd v Wwtai Airopco 1 Bermuda Ltd, a recent decision on the lifting of the administration moratorium.
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Click the links below to view our latest insights and news:
Moratoria: a temporary respite from winding-up petitions?
This article explores how a debtor company can use the Moratorium process to delay a Petitioning Creditor and potentially avoid being wound up.
The ongoing challenges surrounding the Part A1 Moratorium
In this article, we outline the main advantages and disadvantages of the A1 Moratorium, and discuss the key takeaways from Minor Hotel Group MEA DMCC v Dymant [2022] EWHC 340 (Ch).
Bankruptcy order in a breathing space moratorium: does the court have a discretion?
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the "Regulations") enable eligible individuals to benefit from a period of moratorium (often referred to as a 'breathing space') in the face of creditor pressure.
Challenging breathing space moratoria
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 ("the Regulations") were introduced on 4 May 2021.
On 7 March 2024, Paul Stanley KC (sitting as a Deputy High Court Judge) handed down a judgment concerning lifting of an administration moratorium to allow a counterclaim against a company in administration to proceed.
Whilst the High Court allowed the Defendant's counterclaim to proceed, it imposed various conditions on the Defendant, as set out in this article.
A1 Moratoria – a missed opportunity?
On 7 March 2024, Paul Stanley KC (sitting as a Deputy High Court Judge) handed down a judgment concerning lifting of an administration moratorium to allow a counterclaim against a company in administration to proceed.
Whilst the High Court allowed the Defendant's counterclaim to proceed, it imposed various conditions on the Defendant, as set out in this article.
