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Automatic moratorium protection is a cornerstone of the administration regime. The rules are far-reaching and, more often than not, are relied on as a matter of course in the early stages of administration proceedings to provide necessary breathing space.

While the moratorium is an immediate benefit that ostensibly lasts for the administration period, it does in fact have a shelf life. It may be lifted for specific creditor action with either the consent of the Administrator or the permission of the Court. This is however often only an afterthought.

This concept is reiterated on no fewer than five occasions in the moratorium provisions [1]. It should not therefore be surprising as a general principle.

Perhaps, however, we take the moratorium protection for granted. Maybe we should consider it the other way round, particularly given that, in practice, the consent of the Administrator is sought to lift the moratorium at some point in most insolvency proceedings.

There is arguably scope for detailed consideration of any creditor actions before the event. It might be a ripe time for the prospective Administrator to consider and anticipate what steps he might be required to take in respect of the moratorium as creditor pressure heightens in the lead up to the insolvency event. This would put the Administrator on a better platform to manage the wishes and expectations of certain identifiable creditors for the benefit of creditors as a whole.

The benefits of such a forward thinking approach are clear.

Engaging in early dialogue with creditors promotes a conciliatory approach based on the mutual sharing of information. The Administrator should only consent to the moratorium being lifted where reasonably required to do so and he is best placed to reach that determination from an informed position.

Another example is the possible costs savings. Creditors may feel unfairly prejudiced with little control over the conduct of the insolvency process. This may or may not be the case, but experience suggests that apparent creditor perception may result in a hostile approach being adopted from the outset. Protracted exchanges of correspondence between the Administrator (and his advisers) could be minimised, if not avoided completely, by the Administrator taking the first step to diffuse the creditor’s concerns and working collaboratively with that creditor.

There is also scope to lessen the number of complaints made to the Administrator or his regulatory body. Such complaints are time-consuming and potentially detract the Administrator from performing his primary functions as appointed office-holder and indeed an officer of the Court.

Another interesting question is whether an Administrator can lift the moratorium after it has already been breached. Take for example the common situation where the Administrator consents to the moratorium being lifted so Court proceedings may be started for the sole purpose of establishing quantum. The creditor may have already issued proceedings in ignorance of the Administrator’s appointment, and therefore acted in breach of the statutory moratorium. Given the Administrator later decides that it is correct for the proceedings to have been issued, is he entitled to provide his retrospective consent?

This common sense approach is supported by previous cases [2] and appears to follow the obiter comments in previous authority[3] confirming that retrospective consent from an Administrator to lift the moratorium is effective.

While an Administrator can only act on the information currently available to him, there are benefits in taking pragmatic steps at the earliest available opportunity to assess the need for the moratorium to be lifted or not. As noted above, this extends to providing retrospective consent where it is right to do so.

This post was edited by Aneesh Prasad. For more information, email blogs@gateleyuk.com.

[1] Paragraph 43 to Schedule B1 IA1986

[2] Fulton v AIB Group (UK) plc

[3] Bank of Ireland (UK) plc v Colliers International UK plc


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.