The Part A1 moratorium is a standalone breathing space under the Insolvency Act 1986 that stops most creditor action against a struggling but rescuable company while its directors stay in charge. A licensed insolvency practitioner acts as monitor, and the company must keep paying the debts it runs up during the moratorium, wages, rent for the moratorium period and a few other liabilities, or the moratorium will be brought to an end.

Where does the moratorium come from and which companies can use it?

Part A1 was inserted into the Insolvency Act 1986 by the Corporate Insolvency and Governance Act 2020 and came into force on 26 June 2020. It is a debtor in possession process: the directors keep running the business, and a monitor, who must be qualified to act as an insolvency practitioner, oversees it. The Insolvency Service’s guidance says it is not meant for companies with no chance of avoiding failure.

Most companies are eligible, but Schedule ZA1 excludes, among others, insurance companies, banks, electronic money and payment institutions, investment firms, securitisation companies and public private partnership project companies. A company is also excluded if:

  • a moratorium is in force on the filing date, or was in force at any time in the 12 months ending with that date;
  • it is subject to an insolvency procedure on the filing date, such as administration, liquidation or a company voluntary arrangement (CVA); or
  • it was in a CVA or administration at any time in the previous 12 months.

How does a company obtain a moratorium?

Under section A3, the directors of an eligible UK company with no outstanding winding up petition simply file the relevant documents with the court, and the moratorium starts at the moment of filing (section A7). If a winding up petition is outstanding, section A4 requires a court application, and the court can only grant it if a moratorium would achieve a better result for creditors as a whole than an immediate winding up.

Section A6 lists the documents:

  1. a notice that the directors wish to obtain a moratorium;
  2. a statement from the proposed monitor that they are a qualified person and consent to act;
  3. a statement from the proposed monitor that the company is eligible;
  4. a statement from the directors that the company is, or is likely to become, unable to pay its debts; and
  5. a statement from the proposed monitor that a moratorium is likely to result in the rescue of the company as a going concern.

The directors must then tell the monitor, who notifies Companies House and every creditor the monitor knows about (section A8). Under section A19 the company must display a notice at its premises, state on its websites and put on every invoice, order and business letter that a moratorium is in force and who the monitor is. Failing to do so is an offence.

How long does the moratorium last?

The initial period is 20 business days, beginning with the business day after the moratorium comes into force (section A9). It can be extended, but never once it has ended.

Route Provision Effect
Directors, no creditor consent Section A10 After the first 15 business days, a further 20 business days
Directors, with creditor consent Sections A11 and A12 A revised end date approved by pre moratorium creditors, which must fall within one year of the start of the initial period
Court application by directors Section A13 Extended to a date the court sets, considering creditors’ interests and the prospect of rescue
CVA proposal pending Section A14 Continues until the proposal is disposed of

For the directors’ extensions, they must file statements that every moratorium debt and every pre moratorium debt without a payment holiday that has fallen due has been paid, that the company is or is likely to become unable to pay its pre moratorium debts, and a monitor’s statement that rescue remains likely. The moratorium ends early if the company enters a CVA, administration, liquidation or a court sanctioned compromise or arrangement (section A16), or if the monitor or the court terminates it.

What protection does the company get?

Section A20 stops anyone other than the directors presenting a winding up petition (public interest petitions aside) or making an administration application, allows a special resolution for voluntary winding up only if the directors recommend it, prevents out of court appointments of an administrator under paragraphs 14 and 22(1) of Schedule B1, including by a floating charge holder, and prevents the appointment of an administrative receiver. Section A21 adds that, without the court’s permission, a landlord cannot forfeit by peaceable re entry, security cannot be enforced, hire purchase goods cannot be repossessed and legal proceedings cannot be started or continued, subject to limited exceptions such as employment claims. Permission cannot be sought to enforce a debt covered by the payment holiday.

Which debts must still be paid during the moratorium?

The payment holiday in section A18 covers pre moratorium debts, whether they fell due before or during the moratorium, except amounts payable for:

  • the monitor’s remuneration or expenses;
  • goods or services supplied during the moratorium;
  • rent for a period during the moratorium;
  • wages or salary under a contract of employment, which includes holiday pay, sick pay and occupational pension contributions;
  • redundancy payments; and
  • debts under contracts or other instruments involving financial services, as defined in Schedule ZA2.

Those amounts, plus every moratorium debt (a liability the company takes on during the moratorium other than under an obligation incurred before it, as defined in section A53), must be paid as they fall due. Tax arrears that fell due before the moratorium are not on the section A18 list, so they sit within the payment holiday rather than having to be paid during it; for arrears outside a moratorium see HMRC Time to Pay arrangements.

Paying old debts is restricted too. Under section A28 the company may pay any one person no more in total, on debts covered by the payment holiday, than the greater of £5,000 and 1% of its unsecured debts at the start of the moratorium, unless the monitor consents or the court orders it. If winding up proceedings begin within 12 weeks after the moratorium ends, section 174A gives moratorium debts and the protected pre moratorium debts priority over all other claims except the official receiver’s fees and expenses.

What does the monitor do?

The monitor is an officer of the court (section A34) and, under section A35, must keep the company’s affairs under review to decide whether rescue as a going concern remains likely, and may rely on information from the company unless there is reason to doubt it. The directors must provide any information the monitor requires (section A36). The monitor’s consent is needed before the company grants security (section A26), pays old debts above the section A28 limit, or disposes of property outside the ordinary course of business (section A29), and the monitor can only consent if it will support the rescue.

Section A38 obliges the monitor to end the moratorium by filing a notice with the court if rescue is no longer likely, if rescue has been achieved, if the directors’ failure to provide information prevents the monitor doing the job, or if the company cannot pay moratorium debts or debts outside the payment holiday that have fallen due.

What restrictions and offences apply to the directors?

The company commits an offence, as can any officer who authorised it, if it obtains credit of £500 or more without telling the lender that a moratorium is in force (section A25), grants security without consent (section A26) or makes unauthorised payments or disposals (sections A28 and A29). Section A46 makes it an offence for an officer, during the moratorium or in the 12 months before it, to conceal company property worth £500 or more, falsify records or dispose of goods obtained on credit and not paid for. A creditor or member can also apply to court under section A44 if the directors run the company in a way that unfairly harms creditors, and the court can end the moratorium. Wider duties continue; see the duty to consider creditors and wrongful trading.

How might it work for a small company?

Illustration only. A manufacturing company with £400,000 of unsecured debts is cash flow insolvent after losing a major customer, but has a new contract starting in two months. An insolvency practitioner agrees to act as monitor and the directors file at court. It keeps paying wages, rent for the period and new orders. Its section A28 limit is £5,000, because 1% of its unsecured debts is only £4,000, so it can pay a key supplier’s old £3,000 invoice but would need the monitor’s consent to pay that supplier a further £4,000. The directors then put a CVA proposal to creditors. Had the new contract fallen through, the monitor would have had to end the moratorium, and a creditors’ voluntary liquidation might have followed.

What mistakes do directors make?

  • Seeing the moratorium as a way to delay an inevitable liquidation. The monitor must believe rescue is likely at the start and throughout.
  • Underestimating the cash needed. Wages, rent for the period and new supplies must still be paid, and a shortfall forces the monitor to end the moratorium.
  • Paying favoured old creditors above the section A28 limit, which is an offence and may later be challenged as one of the preferences in insolvency.
  • Letting the initial period lapse before filing an extension, since an ended moratorium cannot be revived, and a new one is barred for 12 months.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.