The Part A1 Moratorium Through a Signalling and Information-Processing Lens
27 Pages Posted: 6 Dec 2022
Date Written: November 22, 2022
Using insights from complex systems theory, it is argued in this article that financially distressed large corporates will only seek moratorium protection when the benefits such protection bring outweigh the signalling and information-processing problems associated with it – likely to be in the later stages of distress. With this insight in hand, the article predicts a somewhat gloomy future for the new Part A1 moratorium introduced in the UK by the Corporate Insolvency and Governance Act, 2020. It is suggested that the UK administration moratorium is in fact more fit for purpose, but that serious signalling and information processing concerns remain. After touching on two possible adaptations of the tools, the article concedes that the decision to restrict the usefulness of both tools may have been deliberate. But if this is so, it ends by questioning whether that decision is sustainable in a rapidly changing economic environment.
Keywords: debt restructuring; restructuring moratorium; Corporate Insolvency and Governance Act 2020
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