The United Kingdom has enacted the Corporate Insolvency and Governance Act 2020 which has introduced important reforms to the existing UK insolvency law which includes provisions like freestanding moratorium and a new restructuring plan regime with cross-class cramdown. These are to serve as provisions for the schemes of compromise or arrangement under the Companies Act 2013. Under the Corporate Insolvency and Governance Act, the companies can seek shelter under a freestanding moratorium from the action of the creditor's. Usually, the insolvency law provides a moratorium when the company enters into to irreversible resolution process. Under a free-standing moratorium, the process to be followed for the desired outcome is not predetermined full stop the company has the freedom to choose any viable option to ensure its rescue or restructuring in fact it is not necessary to choose any formal process it can also be rescued or restructured without following a formal process.

The moratorium is overseen by a professional in insolvency who acts as a monitor for the directors of the company will remain in charge. Initially, it is granted for only 20 days but these days can be extended for further 20 more days if the directors make the necessary filings, and if in the view of the monitor the rescue of the company is likely. However and any extension beyond the 40 business days may be granted in very limited circumstances which will involve considering the interest of Pre Moratorium creditors or whether the extension will result in the company continuing as a going concern. To prevent the misuse of this provision exclusions have been made. For example, if a company has been in moratorium preceding 12 months under this act moratorium cannot be ordinarily granted the previous moratorium has to come to an end if the company cannot be rescued.

A freestanding moratorium under the Companies Act or ideas will provide the Indian companies and the creditors to have space to work out a rescue plan so that litigation can be avoided. Many attempts have been made in India to obtain this under the existing Companies Act however a clear legal provision would provide National Company Law Tribunal to have the authority to order such moratorium. The monitor who is accountable to NCLT and the Insolvency and Bankruptcy Board of India will prevent the misuse and objectivity of the resolution process will be ensured. The moratorium is for a limited period of time and this will compel companies and creditors to reach a resolution as quickly as possible. Where the default has already occurred, Reserve Bank of India stressed assets guidelines may be made a precondition for grant of a Moratorium as such an agreement presupposes that the company has reasonable prospects of rescue. Payments to related party creditors that can be financial and operational should be suspended during the granting of Moratorium.

This article does not intend to hurt the sentiments of any individual, community, sect, or religion, etcetera. This article is based purely on the author’s personal opinion and views in the exercise of the Fundamental Rights guaranteed under Article 19(1)(A) and other related laws being enforced in India for the time being.