Moratoriums in Action: How early intervention can save businesses under pressure

When a business faces sudden financial distress, early intervention is the difference between recovery and collapse. But how does a company moratorium actually work when a business is under pressure? Two case studies show what the process looks like from the inside, and four lessons directors consistently learn too late. 

Authors: Richard Curtin, Senior Consultant Solicitor, Setfords and Tom Donnelly, Litigation Executive, Setfords | Last updated: 16 June 2026 | Read time: 6 minutes 

Key takeaways 

• A company moratorium pauses most creditor enforcement for an initial 20 business days, giving directors time to stabilise the business and explore rescue options. 
• The process differs significantly depending on whether a winding-up petition has already been presented. The earlier you act, the simpler the route. 
• Both case studies below involved HMRC pressure. In both, early legal and insolvency practitioner involvement was decisive. 
• A moratorium creates breathing space, not a rescue plan. Directors need a credible commercial strategy for it to succeed. 
• Moratorium debts incurred during the protection period must be paid in full. Failing to account for these is one of the most common mistakes directors make.

What you need to know first 

If you are not already familiar with how a company moratorium works, including the eligibility conditions, the two entry routes, the monitor’s role, and the limits of what it protects against, our earlier article Insolvency moratoriums: underappreciated? covers the legal framework in detail, including the key case law that has shaped how courts and practitioners approach the process. 

This article builds on that foundation with two case studies from Setfords and four practical lessons for directors considering their options. 

Case study 1: Eco services company facing cashflow crisis 

We advised an eco services company that experienced a sudden cashflow crisis driven by delayed customer payments, rising operational costs, and a significant increase in its HMRC liabilities.  

Although the business remained fundamentally viable, it faced increasing creditor pressure, and a risk of key supplier relationships breaking down. Whilst trying to negotiate a payment plan with HMRC, they were also warned of impending enforcement action.  

Without intervention, the company risked entering formal insolvency proceedings, which would have signalled the end of the business and its ability to continue trading.   

Our approach 

We worked closely with directors of the company and licensed insolvency practitioners to: 

• Assess the company’s eligibility for a moratorium and ensure it could continue to be rescued as a going concern.   
• Support the appointment of insolvency practitioners as independent monitors.   
• Assist in implementing a coordinated plan to maintain essential trading.   
• Applied for a moratorium under A3 of the Insolvency Act 1986, which is automatic upon filing of the appropriate documents. As no winding up petition had been presented against the company, applying under this part of the act is a straightforward process. Such a period, granted for 20 business days, was extended for a further 20 business days by the directors of the business under A10 without creditor consent, which is again automatic upon filing of the correct documentation.  
• A further application was made to extend the moratorium for a considered period by order of the court under A13.   

Outcome  

During the moratorium:  

• Creditor pressure was stabilised and enforcement action was completely halted.   
• The company maintained key supplier relationships.  
• Directors were able to focus on restructuring the business and cashflow recovery. 

By the end of the process, the business had regained stability and avoided the more disruptive insolvency procedures that HMRC would have sought to instigate.

Case study 2: Global education business facing a winding-up proceedings 

We advised a global education business facing escalating financial pressure due to historic HMRC tax liabilities.  

HMRC issued a winding-up petition, placing the company at immediate risk of insolvency proceedings. The key concern was that, if advertised, the petition would severely damage the company’s reputation, disrupt relationships with its partners and institutions, and impact ongoing commercial negotiations for a potential sale of that business. 

So, the situation required urgent action. 

Our approach 

We acted immediately to:  

• Apply for a moratorium to protect the company from creditor enforcement under Section A4 of the Insolvency Act 1986. This is required if a company is subject to a petition and requires a larger amount of work to finalise.    
• In addition to filing urgent court documents, supporting evidence and financial information, we engaged insolvency practitioners to act as monitors of the company and provide their professional assessment that the company could be rescued as a going concern.   
• In addition, we engaged with HMRC to reduce the risk of reputational damage and to keep them updated as to the process.   

Once we successfully obtained a court order granting the moratorium, it was extended at a later stage under Section A13 of the Insolvency Act 1986 to create a prolonged period of breathing space for the business to stabilise and explore options. 

The outcome 

As a result:  

• The company was able to continue trading.  
• Immediate enforcement action, and advertisement of the petition, was paused whilst the moratorium was in place.  
• Critical time was secured to pursue restructuring and commercial opportunities for the business.  

What these cases show about how moratoriums work in practice 

These two cases illustrate that the route into a moratorium, and the complexity of the process, changes significantly depending on how far creditor action has already progressed. 

In the first case, acting before HMRC enforcement was formally initiated meant the directors could use the simpler out-of-court filing route. In the second, a petition had already been presented, requiring a court application with a higher evidential threshold and greater urgency. Both reached the same outcome, but the second required considerably more time and resource to achieve it. 

When should directors consider a moratorium? 

Directors facing financial distress should consider whether a moratorium may help when any of the following apply: 

• HMRC has issued, threatened, or is likely to issue a winding-up petition. 
• Creditors are taking or threatening enforcement action that would disrupt trading. 
• The business has genuine commercial value but is unable to service its current debt. 
• A restructuring plan, refinancing, or sale is in progress but needs protection to complete. 
• Cashflow has deteriorated sharply and the business needs time to stabilise. 

The earlier a director seeks advice, the more options are available. Once a winding-up petition is presented and advertised, the window for intervention narrows quickly. 

Key lessons for directors and business owners 

From our experience, there are four consistent lessons for directors and business owners who find themselves in financial distress:   

Act early

Waiting too long reduces available options. Early engagement significantly increases the chances of a positive outcome, especially if enforcement action (often by HMRC) has not been formally initiated by creditors of the company.   

Focus on viability, not just debt

If the underlying business is strong, a moratorium can provide the space needed to recover.  

Have a plan

Legal protection under Part A1 of the Insolvency Act 1986 is only one part of the solution. It must support wider commercial objectives. The court will always want to understand if there is a plan for the business and whether a moratorium will help that business recover accordingly.   

Coordinate with the Monitors

Insolvency practitioners are a key part of the process, acting as a check and balance on the business for the length of the moratorium to continue to confirm the process is appropriate for the business. You must work together with their professional guidance and seek it early alongside the assistance of legal advisers for the most successful outcomes.    

When to speak to a lawyer 

You do not need to be in formal insolvency proceedings, or even on the verge of them, to benefit from early restructuring advice. Speaking to a solicitor makes sense if: 

• Your business is profitable overall but struggling with a specific historic liability (particularly HMRC). 
• You have received a winding-up petition, a statutory demand, or a threat of either. 
• You are in negotiations with a major creditor that have stalled or broken down. 
• You are exploring a sale of the business but need time and stability to complete it. 
• You want to understand, before any crisis, what tools are available to directors in distress. 

Early engagement significantly improves outcomes by keeping more options open while decisions are made. 

FAQs 

What is the difference between the two routes into a moratorium?  

If no winding-up petition has been presented, directors can file out of court under Part A3: a relatively straightforward process that starts automatically on filing. If a petition is already in place, a court application is required under Part A4, which involves a higher evidential threshold and greater urgency. The right route depends on the company’s position, and legal advice is essential before filing. For more on eligibility and the full legal framework, see our article Insolvency moratoriums: underappreciated? 

Why does acting early matter so much?  

The out-of-court route is simpler, faster, and less costly. Once a winding-up petition is presented, that option is no longer available and directors must go to court, with all the additional complexity that involves. The window between a creditor threatening action and presenting a petition can be very short, particularly with HMRC. 

Can HMRC still pursue the company during a moratorium?  

Enforcement action by HMRC is paused during a moratorium. HMRC remains a creditor and will be engaged throughout the process, but cannot take steps to wind up the company or enforce debts while the moratorium is in place. The moratorium does not write off any HMRC liability but creates time to agree a structured resolution. 

Does the company lose control during a moratorium?  

No. Directors retain control of the business and continue to manage it throughout. The licensed insolvency practitioner appointed as monitor oversees the process and must be satisfied that the moratorium continues to benefit creditors, but the monitor does not replace management. 

What happens when the moratorium ends?  

If the restructuring, refinancing, or sale achieves its objective, the company continues trading normally. If the position has not improved and the monitor considers the company can no longer be rescued as a going concern, the moratorium ends and the company may need to enter a formal insolvency process. This is why a credible plan from the outset is essential. 

About the authors 

Richard Curtin has over 35 years’ experience as a solicitor. He specialises in all aspects of contentious and non-contentious insolvency and restructuring, with clients including sole practitioners, boutique firms, silver circle, accountancy firms and the Big Four. 

Tom Donnelly joined Setfords in 2018. He has a broad client base and undertakes many types of commercial litigation, with a particular interest in insolvency and corporate matters.

This article is general information about company moratoriums in England and Wales and is not legal advice. The law and procedures can change, and every situation is different. Please speak to a qualified lawyer about your specific circumstances.