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The moratorium under IA 1986, Part A1

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) made a number of significant changes to insolvency law as it relates to limited liability partnerships (LLPs), including introducing two new procedures: the moratorium and the restructuring plan. For further information on the restructuring plan, see Practice Note: The restructuring plan in respect of a Limited Liability Partnership for further information on the restructuring plan.

The moratorium is an insolvency process whereby directors of insolvent companies and designated members of insolvent LLPs, and those that are likely to become insolvent, can obtain a 20 business day moratorium period. This process, which is found at Part A1 of the Insolvency Act 1986 (IA 1986), is designed to allow viable businesses time to restructure or seek new investment free from creditor action. An insolvency practitioner acts as the ‘monitor’. The members remain in charge of running the business on a day-to-day basis (known as a ‘debtor-in-possession’ process with the LLP being the ‘debtor’) subject to certain constraints. The intention