Corporate Insolvency and Governance Bill (HC Bill 128)

Moratorium

1 Moratoriums in Great Britain

(1) In the Insolvency Act 1986, before Part 1 (but within the First Group of Parts)
insert—

“CHAPTER 1 5Introductory

A1 Overview

(1) This Part contains provision that enables an eligible company, in
certain circumstances, to obtain a moratorium, giving it various
protections from creditors set out in this Part.

(2) 10In this Chapter section A2 introduces Schedule ZA1 (which defines
what is meant by an “eligible” company).

(3) Chapter 2 sets out how an eligible company may obtain a moratorium.

(4) Chapter 3 sets out for how long a moratorium has effect.

(5) Chapter 4 sets out the effects of a moratorium on the company and its
15creditors.

(6) Chapter 5 contains provision about the monitor.

(7) Chapter 6 contains provision about challenges.

(8) Chapter 7 contains provision about certain offences.

(9) Chapter 8 contains miscellaneous and general provision, including—

(a) 5special provision for certain kinds of company;

(b) definitions for the purposes of this Part;

(c) provision about regulations under this Part.

A2 Eligible companies

Schedule ZA1 contains provision for determining whether a company
10is an eligible company for the purposes of this Part.

CHAPTER 2 Obtaining a moratorium

A3 Obtaining a moratorium by filing or lodging documents at court

(1) This section applies to an eligible company that—

(a) is not subject to an outstanding winding-up petition, and

(b) 15is not an overseas company.

(2) The directors of the company may obtain a moratorium for the
company by filing the relevant documents with the court (for the
relevant documents, see section A6).

(3) For the purposes of this Chapter a company is “subject to an
20outstanding winding-up petition” if—

(a) a petition for the winding up of the company has been
presented, and

(b) the petition has not been withdrawn or determined.

A4 Obtaining a moratorium for company subject to winding-up petition

(1) 25This section applies to an eligible company that is subject to an
outstanding winding-up petition.

(2) The directors of the company may apply to the court for a moratorium
for the company.

(3) The application must be accompanied by the relevant documents (for
30the relevant documents, see section A6).

(4) On hearing the application the court may—

(a) make an order that the company should be subject to a
moratorium, or

(b) make any other order which the court thinks appropriate.

(5) 35The court may make an order under subsection (4)(a) only if it is
satisfied that a moratorium for the company would achieve a better
result for the company’s creditors as a whole than would be likely if the
company were wound up (without first being subject to a moratorium).

A5 Obtaining a moratorium for other overseas companies

(1) This section applies to an eligible company that—

(a) is not subject to an outstanding winding-up petition, and

(b) is an overseas company.

(2) 5The directors of the company may apply to the court for a moratorium
for the company.

(3) The application must be accompanied by the relevant documents (for
the relevant documents, see section A6).

(4) On hearing the application the court may—

(a) 10make an order that the company should be subject to a
moratorium, or

(b) make any other order which the court thinks appropriate.

A6 The relevant documents

(1) For the purposes of this Chapter, “the relevant documents” are—

(a) 15a notice that the directors wish to obtain a moratorium,

(b) a statement from a qualified person (“the proposed monitor”)
that the person—

(i) is a qualified person, and

(ii) consents to act as the monitor in relation to the proposed
20moratorium,

(c) a statement from the proposed monitor that the company is an
eligible company,

(d) a statement from the directors that, in their view, the company
is, or is likely to become, unable to pay its debts, and

(e) 25a statement from the proposed monitor that, in the proposed
monitor’s view, it is likely that a moratorium for the company
would result in the rescue of the company as a going concern.

(2) Where it is proposed that more than one person should act as the
monitor in relation to the proposed moratorium—

(a) 30each of them must make a statement under subsection (1)(b), (c)
and (e), and

(b) the statement under subsection (1)(b) must specify—

(i) which functions (if any) are to be exercised by the
persons acting jointly, and

(ii) 35which functions (if any) are to be exercised by any or all
of the persons.

(3) The rules may make provision about the date on which a statement
comprised in the relevant documents must be made.

(4) The Secretary of State may by regulations amend this section for the
40purposes of changing the definition of “the relevant documents” in
subsection (1).

(5) Regulations under subsection (4) are subject to the affirmative
resolution procedure.

A7 Beginning of moratorium and appointment of monitor

(1) 45A moratorium for a company comes into force at the time at which—

(a) in the case of a company to which section A3 applies, the
relevant documents are filed with the court under subsection (2)
of that section;

(b) in the case of a company to which section A4 applies, an order
5is made under section A4(4)(a);

(c) in the case of a company to which section A5 applies, an order
is made under section A5(4)(a).

(2) On the coming into force of a moratorium, the person or persons who
made the statement mentioned in section A6(1)(b) become the monitor
10in relation to the moratorium.

A8 Obligations to notify where moratorium comes into force

(1) As soon as reasonably practicable after a moratorium for a company
comes into force, the directors must notify the monitor of that fact.

(2) As soon as reasonably practicable after receiving a notice under
15subsection (1), the monitor must notify the following that a moratorium
for the company has come into force—

(a) the registrar of companies, and

(b) every creditor of the company of whose claim the monitor is
aware.

(3) 20A notice under subsection (2) must specify—

(a) when the moratorium came into force, and

(b) when, subject to any alteration under or by virtue of any of the
provisions mentioned in section A9(3) or (4), the moratorium
will come to an end.

(4) 25If the directors fail to comply with subsection (1), any director who did
not have a reasonable excuse for the failure commits an offence.

(5) If the monitor without reasonable excuse fails to comply with
subsection (2), the monitor commits an offence.

CHAPTER 3 Length of moratorium

30Initial period

A9 End of the moratorium

(1) A moratorium ends at the end of the initial period unless it is extended,
or comes to an end sooner, under or by virtue of a provision mentioned
in subsection (3) or (4).

(2) 35In this Chapter “the initial period”, in relation to a moratorium, means
the period of 20 business days beginning with the business day after the
day on which the moratorium comes into force.

(3) For provision under or by virtue of which a moratorium is or may be
extended, see—

• 40section A10 (extension by directors without creditor consent);

• section A11 (extension by directors with creditor consent);

Corporate Insolvency and Governance BillPage 5

• section A13 (extension by court on application of directors);

• section A14 (extension while proposal for CVA pending);

• section A15 (extension by court in course of other proceedings).

(4) For provision under or by virtue of which the moratorium is or may be
5terminated, see—

• section A16 (termination on entry into insolvency procedure etc);

• section A38 (termination by monitor);

• section A42 or A44 (termination by court).

(5) A moratorium may not be extended under a provision mentioned in
10subsection (3) once it has come to an end.

(6) Where the application of two or more of the provisions mentioned in
subsections (3) and (4) would produce a different length of
moratorium, the provision that applies last is to prevail (irrespective of
whether that results in a shorter or longer moratorium).

15Extension of moratorium

A10 Extension by directors without creditor consent

(1) During the initial period, but after the first 15 business days of that
period, the directors may extend the moratorium by filing with the
court—

(a) 20a notice that the directors wish to extend the moratorium,

(b) a statement from the directors that all of the following that have
fallen due have been paid or otherwise discharged—

(i) moratorium debts, and

(ii) pre-moratorium debts for which the company does not
25have a payment holiday during the moratorium (see
section A18),

(c) a statement from the directors that, in their view, the company
is, or is likely to become, unable to pay its pre-moratorium
debts, and

(d) 30a statement from the monitor that, in the monitor’s view, it is
likely that the moratorium will result in the rescue of the
company as a going concern.

(2) The rules may make provision about the date on which a statement
mentioned in subsection (1) must be made.

(3) 35On the filing with the court of the documents mentioned in subsection
(1), the moratorium is extended so that it ends at the end of the period—

(a) beginning immediately after the initial period ends, and

(b)
ending with the 20th business day after the initial period ends.

(4) The Secretary of State may by regulations amend this section for the
40purposes of changing the list of documents required by subsection (1).

(5) Regulations under subsection (4) are subject to the affirmative
resolution procedure.

A11 Extension by directors with creditor consent

(1) At any time after the first 15 business days of the initial period the
directors may, if they have obtained creditor consent, extend the
moratorium by filing with the court—

(a) 5a notice that the directors wish to extend the moratorium,

(b) a statement from the directors that all of the following that have
fallen due have been paid or otherwise discharged—

(i) moratorium debts, and

(ii) pre-moratorium debts for which the company does not
10have a payment holiday during the moratorium (see
section A18),

(c) a statement from the directors that, in their view, the company
is, or is likely to become, unable to pay its pre-moratorium
debts,

(d) 15a statement from the monitor that, in the monitor’s view, it is
likely that the moratorium will result in the rescue of the
company as a going concern, and

(e) a statement from the directors that creditor consent has been
obtained, and of the revised end date for which that consent
20was obtained.

(2) The rules may make provision about the date on which a statement
mentioned in subsection (1) must be made.

(3) On the filing with the court of the documents mentioned in subsection
(1), the moratorium is extended so that it ends with the revised end date
25mentioned in the statement under subsection (1)(e).

(4) A moratorium may be extended under this section more than once.

(5) The Secretary of State may by regulations amend this section for the
purposes of changing the list of documents required by subsection (1).

(6) Regulations under subsection (5) are subject to the affirmative
30resolution procedure.

A12 Creditor consent for the purposes of section A11

(1) References in section A11 to creditor consent are to the consent of pre-
moratorium creditors to a revised end date for the moratorium.

(2) The decision as to consent is to be made using a qualifying decision
35procedure.

(3) The revised end date must be a date before the end of the period of one
year beginning with the first day of the initial period.

(4) In this section “pre-moratorium creditor” means a creditor in respect of
a pre-moratorium debt—

(a) 40for which the company has a payment holiday during the
moratorium (see section A18), and

(b) which has not been paid or otherwise discharged.

(5) In determining for the purposes of subsection (4) what counts as a pre-
moratorium debt for which the company has a payment holiday during
45the moratorium, sections A18(3) and A51(1)(b) apply as if the

references to the moratorium were to the moratorium as proposed to be
extended.

(6) The Secretary of State may by regulations amend this section for the
purposes of changing the definition of “pre-moratorium creditor”.

(7) 5Regulations under subsection (6) are subject to the affirmative
resolution procedure.

A13 Extension by court on application of directors

(1) At any time after the first 15 business days of the initial period, the
directors may apply to the court for an order that the moratorium be
10extended.

(2) The application must be accompanied by—

(a) a statement from the directors that all of the following that have
fallen due have been paid or otherwise discharged—

(i) moratorium debts, and

(ii) 15pre-moratorium debts for which the company does not
have a payment holiday during the moratorium (see
section A18),

(b) a statement from the directors that, in their view, the company
is, or is likely to become, unable to pay its pre-moratorium
20debts,

(c) a statement from the directors as to whether pre-moratorium
creditors (as defined by section A12(4) and (5)) have been
consulted about the application and if not why not, and

(d) a statement from the monitor that, in the monitor’s view, it is
25likely that the moratorium will result in the rescue of the
company as a going concern.

(3) The rules may make provision about the date on which a statement
mentioned in subsection (2) must be made.

(4) On hearing the application the court may—

(a) 30make an order that the moratorium be extended to such date as
is specified in the order, or

(b) make any other order which the court thinks appropriate.

(5) In deciding whether to make an order under subsection (4)(a) the court
must, in particular, consider the following—

(a) 35the interests of pre-moratorium creditors, as defined by section
A12(4) and (5), and

(b) the likelihood that the extension of the moratorium will result
in the rescue of the company as a going concern.

(6) Subsection (7) applies where—

(a) 40an application under this section is made, and

(b) apart from that subsection, the moratorium would end at a time
before the application has been disposed of.

(7) The moratorium—

(a) does not end at the time mentioned in subsection (6)(b), and

(b) 45instead, ends—

(i) in a case in which the court makes an order under
subsection (4)(a), in accordance with the order;

(ii) otherwise, when the application is withdrawn or
disposed of.

(8) 5A moratorium may be extended under this section more than once.

(9) The Secretary of State may by regulations amend this section for the
purposes of changing the list of documents required by subsection (2).

(10) Regulations under subsection (9) are subject to the affirmative
resolution procedure.

A14 10Extension while proposal for CVA pending

(1) Subsection (2) applies where—

(a) at any time, the directors make a proposal under Part 1
(company voluntary arrangements), and

(b) apart from that subsection, the moratorium would end at a time
15before the proposal is disposed of.

(2) The moratorium—

(a) does not end at the time mentioned in subsection (1)(b), and

(b) instead, ends when the proposal is disposed of.

(3) For the purposes of this section a proposal under Part 1 is “disposed of”
20when any of the following takes place—

(a) the company and its creditors both decide under section 4 not to
approve the voluntary arrangement contained in the proposal;

(b) the decisions taken by the company and its creditors under
section 4 differ, and—

(i) 25the period for making an application under section
4A(3) expires and either no application has been made
within that period or any application made within that
period has been withdrawn, or

(ii) an application is made under section 4A(3) and that
30application is disposed of, or it is withdrawn after the
expiry of the period for making an application under
section 4A(3),

(c) the voluntary arrangement contained in the proposal takes
effect under section 5;

(d) 35the proposal is withdrawn.

A15 Extension by court in the course of other proceedings

(1) Subsection (2) applies where—

(a) an application is made under section 896 or 901C(1) of the
Companies Act 2006 (arrangements and reconstructions: court
40order for holding of meeting) in respect of a company, and

(b) during proceedings before a court in connection with the
application, a moratorium for the company is in force.

(2) The court may make an order that the moratorium be extended to such
date as is specified in the order.

Early termination on certain grounds

A16 Company enters into insolvency procedure etc

(1) A moratorium comes to an end at any time at which the company—

(a) enters into a compromise or arrangement (see subsection (2)), or

(b) 5enters into a relevant insolvency procedure (see subsection (3)).

(2) For the purposes of this section a company enters into a compromise or
arrangement if an order under section 899 or 901F of the Companies
Act 2006 (court sanction for compromise or arrangement) comes into
effect in relation to the company.

(3) 10For the purposes of this section a company enters into a relevant
insolvency procedure if—

(a) a voluntary arrangement takes effect under section 5 in relation
to the company,

(b) the company enters administration (within the meaning of
15Schedule B1 (see paragraph 1(2)(b) of that Schedule)),

(c) paragraph 44 of Schedule B1 (administration: interim
moratorium) begins to apply in relation to the company, or

(d) the company goes into liquidation (see section 247).

Obligations to notify change in end of moratorium

A17 20Obligations to notify change in end of moratorium

(1) The table imposes obligations on the directors of a company to notify
the monitor where a moratorium for the company is extended or comes
to an end.

(2) After receiving a notice under subsection (1), other than a notice under
entry 4 or 6 of the table, the monitor must notify the relevant persons of
when the moratorium ended or, subject to any alteration under or by
virtue of any of the provisions mentioned in section A9(3) or (4), the
25moratorium will come to an end.

(3) After receiving a notice under entry 4 or 6 of the table, the monitor must
notify the relevant persons.

(4) If a moratorium comes to an end under section A38 (termination by
monitor), the monitor must notify the company and the relevant
30persons of when the moratorium ended.

(5) The rules may—

(a) make further provision about the timing of a notice required to
be given under this section;

(b) require a notice to be accompanied by other documents.

(6) 35If the directors fail to comply with subsection (1), any director who did
not have a reasonable excuse for the failure commits an offence.

(7) If the monitor without reasonable excuse fails to comply with any of
subsections (2) to (4), the monitor commits an offence.

(8) In this section “the relevant persons” means—

(a) 40the registrar of companies, and

(b) every creditor of the company of whose claim the monitor is
aware.

CHAPTER 4 Effects of moratorium

Introductory

A18 Overview and construction of references to payment holidays

(1) This Chapter makes provision about the main effects of a moratorium
5for a company.

(2) The provision made by this Chapter includes restrictions on the
enforcement or payment of the debts that are defined by subsection (3)
as pre-moratorium debts for which a company has a payment holiday
during a moratorium.

(3) 10In this Part a reference to pre-moratorium debts for which a company
has a payment holiday during a moratorium is to its pre-moratorium
debts that have fallen due before the moratorium, or that fall due
during the moratorium, except in so far as they consist of amounts
payable in respect of—

(a) 15the monitor’s remuneration or expenses,

(b) goods or services supplied during the moratorium,

(c) rent in respect of a period during the moratorium,

(d) wages or salary arising under a contract of employment,

(e) redundancy payments, or

(f) 20debts or other liabilities arising under a contract or other
instrument involving financial services.

(4) The rules may make provision as to what is, or is not, to count as the
supply of goods or services for the purposes of subsection (3)(b).

(5) The Secretary of State may by regulations amend this section for the
25purposes of changing the list in subsection (3).

(6) Regulations under subsection (5) are subject to the affirmative
resolution procedure.

(7) In this section—

• “contract or other instrument involving financial services” has the
  30meaning given by Schedule ZA2;

• “monitor’s remuneration or expenses” does not include
  remuneration in respect of anything done by a proposed
  monitor before the moratorium begins;

• “redundancy payment” means—

  (a)

  35a redundancy payment under Part 11 of the
  Employment Rights Act 1996 or Part 12 of the
  Employment Rights (Northern Ireland) Order 1996, or

  (b)

  a payment made to a person who agrees to the
  termination of their employment in circumstances
  40where they would have been entitled to a redundancy
  payment under that Part if dismissed;

• “wages or salary” includes—

  (a)

  a sum payable in respect of a period of holiday (for
  which purpose the sum is to be treated as relating to the

  Corporate Insolvency and Governance BillPage 12

  period by reference to which the entitlement to holiday
  accrued),

  (b)

  a sum payable in respect of a period of absence through
  illness or other good cause,

  (c)

  5a sum payable in lieu of holiday, and

  (d)

  a contribution to an occupational pension scheme.

Publicity about moratorium

A19 Publicity about moratorium

(1) During a moratorium, the company must, in any premises—

(a) 10where business of the company is carried on, and

(b) to which customers of the company or suppliers of goods or
services to the company have access,

display, in a prominent position so that it may easily be read by such
customers or suppliers, a notice containing the required information.

(2) 15During a moratorium, any websites of the company must state the
required information.

(3) During a moratorium, every business document issued by or on behalf
of the company must state the required information.

(4) For the purposes of subsections (1), (2) and (3), “the required
20information” is—

(a) that a moratorium is in force in relation to the company, and

(b) the name of the monitor.

(5) If subsection (1), (2) or (3) is contravened—

(a) the company commits an offence, and

(b) 25any officer of the company who without reasonable excuse
authorises or permits the contravention commits an offence.

(6) In this section “business document” means—

(a) an invoice,

(b) an order for goods or services,

(c) 30a business letter, and

(d) an order form,

whether in hard copy, electronic or any other form.

Effect on creditors etc

A20 Restrictions on insolvency proceedings etc

(1) 35During a moratorium—

(a) no petition may be presented for the winding up of the
company, except by the directors,

(b) no resolution may be passed for the voluntary winding up of
the company under section 84(1)(a),

(c) 40a resolution for the voluntary winding up of the company
under section 84(1)(b) may be passed only if the resolution is
recommended by the directors,

(d) no order may be made for the winding up of the company,
except on a petition by the directors,

(e) no administration application may be made in respect of the
company, except by the directors,

(f) 5no notice of intention to appoint an administrator of the
company under paragraph 14 or 22(1) of Schedule B1 may be
filed with the court,

(g) no administrator of the company may be appointed under
paragraph 14 or 22(1) of Schedule B1, and

(h) 10no administrative receiver of the company may be appointed.

(2) Subsection (1)(a) does not apply to an excepted petition; and subsection
(1)(d) does not apply to an order on an excepted petition.

(3) For these purposes, “excepted petition” means a petition under—

(a) section 124A, 124B or 124C, or

(b) 15section 367 of the Financial Services and Markets Act 2000 on
the ground mentioned in subsection (3)(b) of that section.

A21 Restrictions on enforcement and legal proceedings

(1) During a moratorium—

(a) a landlord or other person to whom rent is payable may not
20exercise a right of forfeiture by peaceable re-entry in relation to
premises let to the company, except with the permission of the
court,

(b) in Scotland, a landlord or other person to whom rent is payable
may not exercise a right of irritancy in relation to premises let to
25the company, except with the permission of the court,

(c) no steps may be taken to enforce any security over the
company’s property except—

(i) steps to enforce a collateral security charge (within the
meaning of the Financial Markets and Insolvency
30(Settlement Finality) Regulations 1999 (S.I. 1999/2979S.I. 1999/2979)),

(ii) steps to enforce security created or otherwise arising
under a financial collateral arrangement (within the
meaning of regulation 3 of the Financial Collateral
Arrangements (No. 2) Regulations 2003 (S.I. 2003/
353226)), or

(iii) steps taken with the permission of the court,

(d) no steps may be taken to repossess goods in the company’s
possession under any hire-purchase agreement, except with the
permission of the court, and

(e) 40no legal process (including legal proceedings, execution,
distress or diligence) may be instituted, carried out or continued
against the company or its property except—

(i) employment tribunal proceedings or any legal process
arising out of such proceedings,

(ii) 45proceedings, not within sub-paragraph (i), involving a
claim between an employer and a worker, or

(iii) a legal process instituted, carried out or continued with
the permission of the court.

(2) An application may not be made for permission under subsection (1)
for the purposes of enforcing a pre-moratorium debt for which the
company has a payment holiday during the moratorium.

(3) An application may not be made for permission under subsection
5(1)(c), (d) or (e) with a view to obtaining—

(a) the crystallisation of a floating charge, or

(b) the imposition, by virtue of provision in an instrument creating
a floating charge, of any restriction on the disposal of any
property of the company.

(4) 10Permission of the court under subsection (1) may be given subject to
conditions.

(5) Subsection (1)(c)(iii) is subject to section A23(1).

(6) In this section—

• “agency worker” has the meaning given by section 13(2) of the
  15Employment Relations Act 1999;

• “employer”—

  (a)

  in relation to an agency worker, has the meaning given
  by section 13(2) of the Employment Relations Act 1999;

  (b)

  otherwise, has the meaning given by section 230(4) of
  20the Employment Rights Act 1996;

• “worker” means an individual who is—

  (a)

  a worker within the meaning of section 230(3) of the
  Employment Rights Act 1996, or

  (b)

  an agency worker.

A22 25Floating charges

(1) This section applies where there is an uncrystallised floating charge on
the property of a company for which a moratorium is in force.

(2) During the moratorium, the holder of the floating charge may not give
any notice which would have the effect of—

(a) 30causing the floating charge to crystallise, or

(b) causing the imposition, by virtue of provision in the instrument
creating the charge, of any restriction on the disposal of
property of the company.

(3) No other event occurring during the moratorium is to have the effect
35mentioned in subsection (2)(a) or (b).

(4) Subsection (5) applies where—

(a) the holder of a floating charge (“the chargee”) is prevented by
subsection (2) from giving a notice mentioned there during the
moratorium, and

(b) 40under the terms of the floating charge, the time for giving such
a notice ends during the moratorium or before the chargee is
given notice of the end of the moratorium under section A17.

(5) The chargee may give notice later than is required under the terms of
the floating charge, but only if the chargee does so as soon as is
45practicable after—

(a) the end of the moratorium, or

(b) if later, the day on which the chargee is notified of the end of the
moratorium.

(6) Where—

(a) subsection (3) prevents an event which occurs during the
5moratorium from having the effect mentioned there, and

(b) the holder of the floating charge gives notice of the event to the
company as soon as is practicable after—

(i) the end of the moratorium, or

(ii) if later, the day on which the chargee is notified of the
10end of the moratorium,

the event is to be treated as if it had occurred when the notice was
given.

A23 Enforcement of security granted during moratorium

(1) Security granted by a company during a moratorium in relation to the
15company may be enforced only if the monitor consented to the grant of
security under section A26.

(2) See also section A21(1)(c), which restricts enforcement during a
moratorium.

Notification of insolvency proceedings

A24 20Duty of directors to notify monitor of insolvency proceedings etc

(1) The directors of a company must notify the monitor before taking any
of the following steps during a moratorium—

(a) presenting a petition for the winding up of the company;

(b) making an administration application in respect of the
25company;

(c) appointing an administrator under paragraph 22(2) of Schedule
B1.

(2) The directors of a company must notify the monitor if, during a
moratorium for the company, they recommend that the company
30passes a resolution for voluntary winding up under section 84(1)(b).

(3) The rules may make provision about the timing of a notice required to
be given under subsection (1) or (2).

(4) If the directors fail to comply with subsection (1) or (2), any director
who did not have a reasonable excuse for the failure commits an
35offence.

Restrictions on transactions

A25 Restrictions on obtaining credit

(1) During a moratorium, the company may not obtain credit to the extent
of £500 or more from a person unless the person has been informed that
40a moratorium is in force in relation to the company.

(2) The reference to the company obtaining credit includes—

(a) the company entering into a conditional sale agreement in
accordance with which goods are to be sold to the company,

(b) the company entering into any other form of hire-purchase
agreement under which goods are to be bailed (in Scotland,
hired) to the company, and

(c) the company being paid in advance (whether in money or
5otherwise) for the supply of goods or services.

(3) If a company contravenes subsection (1)—

(a) the company commits an offence, and

(b) any officer of the company who without reasonable excuse
authorised or permitted the obtaining of the credit commits an
10offence.

A26 Restrictions on grant of security etc

(1) During a moratorium, the company may grant security over its
property only if the monitor consents.

(2) The monitor may give consent under subsection (1) only if the monitor
15thinks that the grant of security will support the rescue of the company
as a going concern.

(3) In deciding whether to give consent under subsection (1), the monitor
is entitled to rely on information provided by the company unless the
monitor has reason to doubt its accuracy.

(4) 20If the company grants security over its property during the moratorium
otherwise than as authorised by subsection (1)—

(a) the company commits an offence, and

(b) any officer of the company who without reasonable excuse
authorised or permitted the grant of the security commits an
25offence.

(5) For the consequences of a company granting security over its property
in contravention of subsection (1), see also section A23.

(6) The monitor may not give consent under this section if the granting of
security is an offence under section A27.

A27 30Prohibition on entering into market contracts etc

(1) If a company enters into a transaction to which this section applies
during a moratorium for the company—

(a) the company commits an offence, and

(b) any officer of the company who without reasonable excuse
35authorised or permitted the company to enter into the
transaction commits an offence.

(2) A company enters into a transaction to which this section applies if it—

(a) enters into a market contract,

(b) enters into a financial collateral arrangement,

(c) 40gives a transfer order,

(d) grants a market charge or a system-charge, or