They were insolvent, at which point they are not allowed to trade. There's a specific offence of trading whilst insolvent.

The CAA brings all the UK customers home as near to on schedule as possible under ATOL rules. Not sure how other nations play it out.

There was talk after Monarch's collapse a couple of years ago of permitting an exception in the insolvency rules. Specifically to allow the use of the collapsed group's aircraft and pilots. No more was every heard of it. But it was Chris "failing" Grayling as Transport Secretary, so hardly surprising the initiative failed.