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AN ASSESSMENT OF THE UK RESTRUCTURING MORATORIUM

Lloyd's Maritime and Commercial Law Quarterly

AN ASSESSMENT OF THE UK RESTRUCTURING MORATORIUM

Jennifer Payne *

Many jurisdictions have recently introduced reforms to their debt restructuring regimes in order to ensure that financially distressed but viable companies have effective tools to facilitate their rescue. The COVID-19 pandemic has intensified the need for such tools. The inclusion of a statutory stay is a consistent feature in these reforms. This article examines the introduction of a restructuring moratorium in the UK as part of its recent debt restructuring reforms, introduced by the Corporate Insolvency and Governance Act 2020. While moratoria can be potentially very valuable in promoting the rescue of a company or business, a balance is required between the benefits to the company and the creditors as a whole on the one hand and the rights of the individual creditors on the other. The success of the UK’s restructuring moratorium in achieving a successful balance is assessed. Ultimately it is argued that the necessary balance does not seem to have been achieved and that the constraints and limitations placed on the moratorium, for creditor protection and other reasons, limit the potential value of this mechanism to a significant extent. Many companies will therefore have to continue to look elsewhere for protection from creditors seeking to disrupt their restructurings.

I. INTRODUCTION

In recent years many jurisdictions around the world have sought to ensure that their regimes provide an effective debt restructuring mechanism for financially distressed but viable companies. The paradigm situation is a debtor that is distressed and facing a liquidity crisis but whose underlying business is fundamentally sound. A sale of the business may not always be available, particularly during periods of macroeconomic uncertainty, and some form of debt restructuring can enable the company to avoid entry into a formal insolvency procedure. The importance of including such a mechanism within the toolkit of financially distressed companies was highlighted by the 2008 global financial crisis, and the financial distress caused by the COVID-19 pandemic has created additional urgency to this issue. Other factors have played a part too, including a measure of regulatory competition as jurisdictions around the world have started to unveil their debt restructuring proposals. There has also been increased political focus in the UK and
An assessment of the UK restructuring moratorium

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