Moratorium (insolvency)

Definition

A moratorium temporarily bars creditors from enforcing debts, presenting winding-up petitions or repossessing goods, giving the company protected time to pursue a rescue. It applies automatically in administration and as a standalone tool under the Corporate Insolvency and Governance Act 2020.

In plain terms

It is a legally enforced timeout that stops the pile-on while directors and advisers work out the best way forward.

Why it matters for your company

A moratorium is a powerful but time-limited shield, overseen by a monitor. It works only alongside a credible plan. Acting before creditors escalate keeps more options open. See forbearance.

In practice

Picture a limited company whose cash position has deteriorated to the point that a supplier is threatening legal action and a landlord is preparing to seek repossession. Directors and their advisers can use a moratorium to pause that pressure, giving the business a defined window to prepare a restructuring or refinancing proposal instead of reacting to enforcement threats one at a time.

During that window a monitor oversees the company, and directors typically remain in day-to-day control, but with reporting obligations to demonstrate the rescue plan is real and progressing. The value is not the pause itself but what the company does with it — engaging creditors, exploring a CVA or other route, and building a case that the business is viable beyond the immediate squeeze.

How lenders read it

A funder assessing a company that has entered, or previously entered, a moratorium will look past the label itself and focus on what triggered it and what happened next. A moratorium used early, alongside a credible turnaround plan and engaged directors, reads very differently from one entered late as a last resort with no clear exit.

Lenders will typically want to understand the underlying cause of the pressure, whether it has been resolved or is being actively managed, and how the company has behaved with creditors since — timely engagement and transparency tend to matter more than the fact that a moratorium occurred at all.