The Insolvency Service: Draft Guidance for Monitors

June 17, 2020

By Giles Maynard-Connor and Jodie Wildridge

Though not drafted with the intention to be a “manual for insolvency practitioners undertaking an appointment as monitor”;[1] the Draft Guidance for Monitors published by the Insolvency Service on 16 June 2020 (“the Draft Guide”) will, when finalised, provide, at the very least, a useful and user-friendly starting point both for those insolvency practitioners tasked with performing this important new role, and for the lawyers advising them.

The Draft Guide sets out the fundamental amendments to the Insolvency Act 1986 (“IA 1986”) currently proposed by the Corporate Insolvency and Governance Bill (“CIGB”), and these may change as the CIGB passes through Parliament;  of but most significantly, the Draft Guide extends practical guidance and suggestions in support of, and to assist with, the implementation of the proposed amendments.

The Draft Guide

The substance of the Draft Guide, a copy of which can be accessed here, is divided up as follows:

  • Role and Functions of Monitor
  • Schedule 4 CIGB – Part 3 and 4: Temporary Provisions Pending the Making of the Rules
  • Entry into a Moratorium, Monitor’s Consent to Act and Appointment
  • Effects of a Moratorium
  • Obligation to Notify Moratorium coming into force
  • Termination of Moratorium by Monitor
  • Extension or End of Moratorium
  • Priority of Moratorium debts
  • Restrictions (including payments and disposal of property and others)
  • Permitted Disposals
  • Challenge to Directors’ actions
  • Challenge to Monitor’s actions and Replacement of Monitor by Court (or appointment of additional Monitor)
  • Monitor’s remuneration
  • Schedule 4 CIGB – Part 2: GB Moratoriums: Temporary Modifications in light of coronavirus

The Draft Guide’s most significant suggestions as to the practical implementation of the CIGB proposals relating to Monitors is perhaps seen in the Chapter discussing their role and functions.[2]

The status and role of the Monitor was considered in detail by us as part of yesterday’s Special Insolvency Conference on the CIGB (part 2 of the conference takes place on 18 June 2020) and for those interested our PowerPoint Presentation will be available shortly. However, of particular note is the proposed section A6 of the IA 1986, which stipulates that directors of a company seeking to enter into a moratorium are to file a statement with the Court from the Monitor confirming, amongst other things, that the Monitor holds the view that it is likely that a moratorium for the company would result in the rescue of the company as a going concern.[3]

The Draft Guide, however, supplements the proposed section A6 of the IA 1986:

“Prior to the moratorium the prospective monitor will need to engage with the directors and seek information about the company’s assets, liabilities and business so that they are able to assess the company’s financial position, prospects and eligibility for a moratorium. The extent of this pre-appointment work will be for the insolvency practitioner using their professional experience and judgement to decide on and should be proportionate to the size and complexity of the company.”[4]

The Draft Guide also takes potential Monitors through the ethical considerations which ought to be borne in mind upon accepting an appointment as Monitor following pre-appointment engagements or prior insolvency appointments; and/or arising upon a Monitor’s subsequent appointment as, for example, administrator or liquidator of the company:

“An insolvency practitioner will also need to have regard to the Code of Ethics in relation to accepting an appointment as monitor following any pre appointment engagements or prior insolvency appointments when assessing whether the circumstances give rise to a significant professional relationship with the company that wishes to obtain a moratorium.

Practitioners may find it helpful to refer to section 2520 of the Code of Ethics that deals with “Examples relating to previous or existing insolvency appointments” in terms of how any subsequent insolvency appointments following appointment as monitor (as administrator or liquidator for example) may be treated.”[5]

Support and guidance drafted to assist insolvency practitioners is scattered throughout the Draft Guide:

  • The CIGB’s proposed amendment to section 388(1) of the IA 1986 brings Monitors within the regulatory framework applicable to insolvency practitioners acting as insolvency office-holders. In practice, this means that Monitors are required, as a pre-requisite to their appointment, to take out a bond; and the Draft Guide goes on to provide greater detail of the bonding requirements to which Monitors ought to be mindful when accepting new appointments in this role.[6]
  • The Draft Guide cross-refers the relevant provisions in the CIGB with the effects of the amendments to the Insolvency Practitioners Regulations 2005 (“IPA 2005”). For example, regulation 13 of the IPA 2005 relating to the records which must be maintained by an insolvency practitioner, applies to the office of Monitor. The Draft Guide considers the substance of such record-keeping, suggesting for example that a record is kept of, amongst other things, an explanation as to why a Monitor has made a statement that it is likely that a moratorium would result in the rescue of the company as a going concern; or an explanation as to why a Monitor’s consent was given to certain actions being undertaken by the company.[7]
  • As regards the delivery of documents relating to the moratorium, the Draft Guide gives the following practical recommendation:
    “We acknowledge that owing to the COVID-19 pandemic, delivery by post may not present the best option and therefore encourage the use of email is as a primary method of contact. If postal delivery is used, we recommend that it is via first class delivery to ensure that documents can be received in a timely manner so that the monitor can fulfil his notification obligations without delay.”[8]
  • In respect of a Monitor’s duty pursuant to the proposed section A8 of the IA 1986 to notify all creditors of whose claim the Monitor is aware of the coming into force of the moratorium, the Draft Guide sets out a Monitor’s permitted means of delivery of the requisite notice;[9] and what would be “helpful” to include in such notice alongside the mandatory content pursuant to the CIGB.[10]

Not only does the Draft Guide deal with the implementation of a Monitor’s statutory duties, but it also provides a number of suggestions as to supplementary actions that could and should be undertaken by Monitors, despite them not being strictly obliged to do so, in order to make the moratorium more effective and to greater assist the company’s directors in steering the company through the difficulties they may face during the period of the moratorium.[11]


Despite its detail, the CIGB does leave a number of number of questions unanswered; and the Draft Guide is to be commended as, helpfully, going some way towards filling that void.

Offering a substantive guide to the statutory duties of Monitors pursuant to the proposed amendments to the IA 1986, alongside a consideration of how such duties can be effectively undertaken in practice, and the relevant considerations which ought to be borne in mind, the Draft Guide when finalised will no doubt provide an incredibly useful tool for insolvency practitioners as they embark upon their new supervisory role during the moratorium of a company.

We await to see the guidance in its final form.

[1] Page 1 of the Draft Guide.

[2] Chapter 2 of the Draft Guide.

[3] The proposed section A6 of IA 1986 in this form (which may be amended given issues raised as to the use of the word ‘would’ as opposed to ‘could’) is a permanent provision of the CIGB. However, where a moratorium is entered into by a company in the period between the date on which Schedule 4 of the CIGB comes into force, and one month after the coming into force of the CIGB, the test is more relaxed: the Monitor must keep a supervisory eye on the company’s affairs for the purpose of forming a view as to whether it remains likely that the moratorium will result in the rescue of the company as a going concern or that, if one were to disregard any worsening of the financial position of the company for reasons relating to coronavirus, it is likely that the moratorium would result in the rescue of the company as a going concern (Sch 4. Part 2, ¶9 CIGB).

[4] Page 6 of the Draft Guide.

[5] Pages 7 and 8 of the Draft Guide.

[6] Pages 8 and 9 of the Draft Guide.

[7] Page 9 of the Draft Guide.

[8] Page 10 of the Draft Guide.

[9] Page 20 of the Draft Guide.

[10] Page 20 of the Draft Guide.

[11] Specific examples include the suggested assistance to company directors at pages 28 and 30 of the Draft Guide.