{"id":176773,"date":"2022-10-11T18:31:34","date_gmt":"2022-10-11T17:31:34","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=176773"},"modified":"2025-07-02T00:38:48","modified_gmt":"2025-07-01T23:38:48","slug":"business-owed-money-pre-insolvency-moratorium","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/business-owed-money-pre-insolvency-moratorium\/","title":{"rendered":"My Business is Owed Money. What is a Pre-Insolvency Moratorium?\u00a0"},"content":{"rendered":"\n

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If another business owes your business money which is overdue, it may be insolvent or close to insolvency. You may, therefore, have received notice from your debtor that it has obtained a moratorium from an English court. A pre-insolvency moratorium means that you cannot pursue your debtor in court for their debt to you. For instance, you may supply a client with \u00a3100,000 of professional services, which the client cannot repay. Alternatively, these may be \u00a3100,000 worth of goods.\u00a0This article will explain in detail how pre-insolvency moratoria operate and their practical effect on you as a creditor.<\/p>\n\n\n

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This article is Part 2 of our series exploring pre-insolvency moratoriums. In Part 1<\/a>, we discuss the impact of a pre-insolvency moratorium when your business is in financial difficulty and facing insolvency. In this article, we look at the flip side: what happens if your company is one of the company’s creditors who is owed money?\u00a0<\/p>\n<\/div>\n\n\n

Pre-Insolvency Moratorium <\/span><\/h2>\n\n\n\n

In general, <\/span>a moratorium<\/span><\/a> is a court order forbidding any party, such as your business, from bringing any claim against another business, such as your debtor, for a specific period. A pre-insolvency moratorium can only apply to limited companies and LLPs, so not possible for sole traders, general partnerships, or private individuals.<\/span><\/p>\n\n\n\n

When a moratorium is in place, you cannot petition the court to initiate proceedings against the company as one of the company’s creditors. If there is no moratorium in place, you can commence proceedings against the company. If your case is strong, the court may make an order in your favour. <\/span><\/p>\n\n\n\n

Purpose of a Pre-Insolvency Moratorium  <\/span><\/h2>\n\n\n\n

Clearly, moratoria are not in your favour as a creditor. However, they are in place for a good reason, as when a company is facing financial difficulty, the law prefers for the company to work together with its creditors towards a solution. <\/span><\/p>\n\n\n\n

This encourages you to work together with any other creditors so that you all can receive some of your debt back. Otherwise, they may organise without you, negotiate with the debtor and arrive at a solution, not in your interest. <\/span><\/p>\n\n\n\n

Moratoria also saves the court time and resources by avoiding separate claims by the company\u2019s creditors.<\/span><\/p>\n\n\n\n

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