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The directors remain in full control of the business.

The monitor’s role is to make an ongoing assessment of whether the company still meets the moratorium criteria – that it can pay debts falling due during the moratorium and that it is likely to be rescued as a going concern. This will involve the monitor receiving regular updates on trading (such as management accounts), the company’s forecast cash position and what financial commitments the company is making.

If at any stage the monitor considers that one of both of these criteria are not met then the moratorium will be brought to an immediate end. The purpose of the moratorium is to give the company time to formulate a restructuring plan which will enable it to exit the moratorium and return to normal trading. The restructuring plan might take the form of operational changes (such as reducing costs or disposing of loss-making parts of the business), agreeing a reduction or deferment of some of its liabilities (either through separate agreements with certain creditors or through a CVA process) or raising additional finance to enable it to deal with short term cash flow issues.

The initial period of the moratorium (20 business days) can be extended by a further 20 business days simply be a further filing of forms. After that there are two options for further extending the moratorium:

• Obtaining creditors consent (by vote) to an extension for up to a year from the original start date
• Obtaining an extension from the court to a date to be set by the court. This option requires a court hearing.

If the moratorium is extended beyond its original terms, by whatever method, the company must continue to meet the criteria at all times otherwise the monitor will be obliged to terminate it.