The UK government is seeking comments to a white paper it has issued on the idea of creating a restructuring moratorium. Such a moratorium would allow companies that face cash flow issues to seek a moratorium on their debts as they seek to restructure them. The move would add a new layer of flexibility to the existing bankruptcy and administration regimes.

The paper is a response to the £90 billion of private equity related leveraged loans that are due to mature between now and 2015.

According to the government paper, "there is an increased risk that businesses that are otherwise viable could be forced into a formal insolvency process as a result of a failed restructuring." This would have large implications for jobs, suppliers and other customers of the failed business.

Under the proposal, the moratorium would last three months and would have to be part of an agreed scheme of arrangement between the company and its creditors. It would also have to be approved at a court hearing at which creditors need to be represented. A registered insolvency practitioner would also need to be involved.

Responses to the paper can be received until October 18 but already industry bodies are supportive. Stuart Siddall, the chairman of the UK's Association of Corporate Treasurers has called it a "worthwhile initiative."  He also notes that particular care must be paid to the interests of suppliers over and above the claims of creditors. Also he says that it should not be used as a way out of repayments by companies that are already insolvent.

The overriding aim of the government's move is to provide a breathing space for companies, rather than a way for them to get out of paying their debts. Even so the move adds flexibility to a system that can prove legalistically brittle.