Phoenix Company Strategy & Part A1 Moratorium: Restart Cleanly Without Losing Your Property

A phoenix is the legitimate UK practice of acquiring the viable parts of an insolvent
business through a properly structured sale, leaving the unrescuable liabilities behind in
the original entity. Done correctly, it preserves jobs, customer relationships, and the
trading enterprise. Done badly, it draws Insolvency Service investigation under the Company
Directors Disqualification Act 1986 and section 216 of the Insolvency Act 1986 (re-use of
prohibited names). Done expensively, it ends with the director’s personal property —
freehold, leasehold, plant under personal guarantee, intellectual property held in a
connected entity — swept into the asset sale because no one drafted a carve-out into the
asset purchase agreement.

This guide covers two procedures in sequence: first the
Part A1 statutory moratorium introduced by the Corporate Insolvency and
Governance Act 2020, which gives directors 20 business days (extendable) of breathing space
under the supervision of a monitor; and second the phoenix sale structure,
including the carve-outs that determine which assets transfer and which stay with the
director. It complements the
director’s pre-insolvency guide,
the
CVA self-help guide,
and the
DIY insolvency forms toolkit.

Part A1 moratorium — the structure

The free-standing moratorium under Part A1 of the Insolvency Act 1986 is the most
director-friendly statutory tool the UK has introduced in a generation. The directors stay
in management control. A licensed insolvency practitioner is appointed as monitor —
not as administrator, not as supervisor with veto. The monitor’s role is narrow: to confirm,
on appointment and continuously, that the rescue of the company as a going concern remains
likely.

Effect of the moratorium

• No winding-up petition can be presented (subject to limited exceptions).
• No landlord forfeiture by peaceable re-entry without permission.
• No enforcement of security or repossession of goods on hire purchase / lease.
• No legal process against the company without leave of court.
• Pre-moratorium debts are not payable during the moratorium period.

Eligibility and entry

• The company must be eligible under Schedule ZA1 — most trading SMEs are. Banks, insurance companies and certain financial services entities are excluded.
• Two statements are filed at court: (a) a directors’ statement that the company is, or is likely to become, unable to pay its debts; and (b) the monitor’s statement that, in their view, it is likely the moratorium would result in the rescue of the company as a going concern.
• Notice is given to every creditor of whom the company is aware (rule 1A.7, Insolvency Rules 2016).
• The moratorium begins on filing and runs for 20 business days, extendable by directors’ decision (further 20 days) or by creditor consent / court order.

What the moratorium is for

The breathing space is the time to do the work the proposal needs: the cashflow forecast,
the creditor negotiations, the CVA proposal package, the funding conversations, the
restructuring plan if there is one. Coming out of the moratorium with a CVA approved is the
canonical good outcome. Coming out of it with administration or CVL is also a clean outcome
because the assets have been preserved against creditor enforcement during the planning.

The phoenix sale — when it is the right tool

Phoenix is the term for selling the viable trading business of an insolvent company —
typically through administration or CVL — to a new entity (“Newco”), leaving the
unrescuable liabilities (overdue tax, rent arrears, defunct supplier debts) behind in the
original company (“Oldco”). The directors of Oldco frequently are also directors and
shareholders of Newco. This is permitted; it is also heavily scrutinised. Three statutory
regimes set the rules:

• Section 216, Insolvency Act 1986 (prohibited re-use of name). A director of an insolvent company cannot, for 5 years, be a director of, or involved in the management of, another company using the same or substantially similar name — except under one of the three exceptions (court leave, formal notice to creditors, established prior use).
• SIP 16 disclosure. Pre-pack sale arrangements must be disclosed in detail in the administrator’s first proposals — marketing strategy, valuations obtained, basis of consideration, related-party identities.
• Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021. Connected-party sales completed within the first 8 weeks of administration require either creditor approval or an independent evaluator’s report (“the Pre-Pack Evaluator”).

The property carve-out — why directors lose property they did not need to lose

This is the single most expensive mistake in unguided phoenix transactions. The administrator
or liquidator’s marketing brief is wide by default — every asset that could belong to
the insolvent estate is offered for sale, on the basis that any potential claim is included
in what the buyer is paying for. If the director does not specify, in writing and at the
outset, exactly which assets are not in the estate, the transaction structure pulls
them in.

Common assets that need an explicit carve-out

• Property held in the director’s personal name. If the company traded from premises owned by the director, those premises do not belong to the estate — but if the director has used them as security for company borrowing, or if the company has paid for material improvements without a formal arrangement, the picture is contested. Document ownership and any improvement-related claims clearly, in writing, before the sale process begins.
• Property held in a connected entity. Land, vehicles, plant, intellectual property held in a sister company or a personal SPV need to be identified as not-for-sale. The administrator’s marketing brief should be amended to record the exclusion before any indicative offer is sought.
• Director’s personal goodwill. Where the trading goodwill follows the director personally — typical in professional services and consulting businesses — the goodwill that transfers to Newco is not the same as the goodwill that was in Oldco. Pricing and structure should reflect that distinction.
• Personally-guaranteed assets. Plant under hire purchase or finance lease backed by a personal guarantee should not transfer in a way that double-charges the director.
• Intellectual property registered to the director or a connected entity. Domain names, trade marks and software code held outside Oldco need explicit confirmation of separate ownership.

How to make the carve-out stick

• Document ownership before insolvency. Land registry, IP registries, finance schedules, lease originals — all should be in order and capable of being produced.
• Write to the IP at the outset with a schedule of excluded assets, the basis of exclusion, and the supporting documents. Do this before the marketing brief is finalised.
• Insist that the marketing brief itself record the carve-outs so that potential buyers price what is actually for sale, not what is claimed to be for sale.
• Insist on an independent valuation for any borderline asset whose ownership is contested. Reg 2021 already requires the Pre-Pack Evaluator’s report on connected-party sales — use that mechanism honestly to its full extent.
• Keep the asset purchase agreement narrow. Schedule the assets being sold by reference; do not use sweeping “all rights, title and interest” language without an exclusions schedule attached.

Setting up Newco — the practical sequence

• Form Newco with a legitimately different name, or invoke one of the section 216 exceptions properly (most commonly the formal notice to creditors under rule 22.4 IR 2016).
• Capitalise Newco honestly with funds that are demonstrably not Oldco’s. Loans from connected parties should be documented at arm’s-length terms.
• Engage with the licensed IP early — but ensure the IP’s marketing brief records the carve-outs from day one.
• Commission the Pre-Pack Evaluator’s report if Newco is a connected party and the sale is intended to complete within 8 weeks of administration. The Evaluator’s positive report is the public legitimacy mark on the transaction.
• Disclose under SIP 16 in the administrator’s first proposals — marketing strategy, valuations, alternative outcomes considered, basis of pricing.
• Honour the section 216 notice obligations if relying on the creditor-notice exception: the Newco directors must be named in formal notices to every creditor of Oldco.

Director disqualification risk — what to anticipate

The Insolvency Service investigates the conduct of every director of a failed company. The
patterns that draw a CDDA 1986 application are well-established: trading while insolvent
without genuine reasonable prospects of recovery (section 214 wrongful trading),
preferential payments to connected creditors in the run-up to insolvency, transactions at
undervalue, failure to keep adequate accounting records, failure to pay Crown debts. A
properly-evidenced phoenix — with the moratorium, the cashflow analysis, the contemporaneous
board minutes, the SIP 16 disclosure and the Evaluator’s report — is the strongest defence to
a later disqualification application. The
CDDA defence guide
covers each ground in detail.

How Chris drafts the moratorium and phoenix package

Each procedure is a stack of documents: the directors’ moratorium statement, the monitor’s
qualification confirmation, the creditor notification letters, the schedule of excluded
assets, the asset purchase agreement carve-outs schedule, the SIP 16 disclosure narrative,
the section 216 creditor notice, the Newco capitalisation paper trail.

Tell Chris the company’s facts. Upload the Oldco accounts, the asset registers, ownership
documents for any assets you want carved out, and the proposed Newco structure. Chris drafts
the full document set — referenced to the Insolvency Act 1986, the CIGA 2020 amendments, the
Insolvency Rules 2016, SIP 16 and Reg 2021 — for review by the licensed IP and the company’s
solicitor. We work under an aggregated model that gathers data for your cases. Your data —
your chat — is archived and never viewed by another human.

Companion guides

• Director’s pre-insolvency step-by-step guide
• CVA self-help drafting guide — cut £20k-£50k IP fees
• DIY CVA & Insolvency Toolkit — every HMCTS form
• Pre-pack administration — SIP 16 and the Evaluator
• Director disqualification defence (CDDA 1986)
• All insolvency & debt forms — full hub

This is procedural literacy, not legal advice. Phoenix transactions are scrutinised under the
Insolvency Act 1986, the Company Directors Disqualification Act 1986, SIP 16, and the
Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021. The
role of this guide is to help directors arrive at the regulated work properly prepared, not
to replace the licensed insolvency practitioner whose nominee, monitor or administrator
function the law requires.