Balance sheet insolvency meaning

Cresta Estates Ltd and other companies v MPB Developments Ltd and others [2025] EWHC 198 (Ch) What are the practical implications of this case? This case examines the Supreme Court’s remarks on the IA 1986, s 123 insolvency test in BNY Corporate Trustee Services Ltd v Eurosail‑UK 2007‑3BL plc [2013] 1 WLR 1408 (Eurosail), and maps the later authorities that have developed those observations, with a particular emphasis on applying the test where liabilities fall due a long way into the future. It surveys how those principles have been treated since Eurosail, especially in relation to such long‑dated obligations. As a reminder, under the ‘balance sheet test’ a company is regarded as unable to discharge its debts if ‘it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities’ (IA 1986, s 123(2)). The judgment delivered by Mrs Justice Joanna Smith highlights the inherently fact‑sensitive character of the...

Having emerged in 2011 by picking up the assets of a failed carrier at auction, and later expanding by buying a smaller carrier in a further insolvency sale, Silver Airways filed for Chapter 11 on 30 December 2024. A shift to a new aeroplane manufacturer badly disrupted Silver Airways' business and finances, driving the company to seek investments and loans from its parent and others, according to a first-day declaration by CEO Steven A. Rossum. Silver Airways' largest individual creditor is Versa Capital Management, the private equity fund that has owned it since 2017 and holds a $211m second-lien loan. In 2022 it issued $50m of convertible notes to Brigade Capital Management LP, an amount that swelled to $186m over two years. The terms of the Brigade loan provided that Silver Airways would be penalised with an increase in the loan's principal if it failed to make interest payments in cash, according to a bankruptcy declaration. A further $60m in unsecured debt rounds out the balance sheet in total...

In this issue: Corporate insolvency processes Personal insolvency Directors and insolvency Insolvency litigation The office-holder International restructuring and insolvency Daily and weekly news alerts Key dates for restructuring and insolvency professionals New Q&As Corporate insolvency processes Water (Special Measures) Act 2025 This Act sets out measures on the oversight, governance and special administration of water companies. It commenced in part on 24 February 2025, will commence further on 24 April 2025, and will take full effect on a day to be appointed by regulations made by the Secretary of State and the Welsh Ministers. See: LNB News 25/02/2025 12. Court approves administrators' Paragraph 71 applications (Kennedy v Fonds Rusnano Capital SA) The High Court sanctioned administrators’ bids under paragraph 71 of Schedule B1 to the Insolvency Act 1986 to dispose of assets subject to fixed charges owned by four English companies without the fixed charge holder’s consent. Given the pressured...

This Practice Note offers guidance for the commercial practitioner on identifying when a company is encountering significant financial distress. It also condenses the key matters to prioritise to steady the business whilst evaluating the options available to the company, and outlines considerations for a business trading with a company in financial difficulty... Establishing serious financial difficulty Signals can usually be detected in a company’s financial statements and management accounts, as well as in communications with major suppliers and debt providers (eg banks, supplier statutory demands, etc). If the board fails to deal with these indicators, they will, in most cases, result in a value‑destroying formal insolvency of the company... Warning signs heightened competition causing loss of key customers and tighter margins an outmoded business model due to technological advances or shifts in customer demand/revenue channels weak cash generation/poor working capital management excessive debt and...

Practice Note It has long been settled that a winding-up should not be set in motion where the petition debt is genuinely and substantially in dispute. Should an alleged creditor nonetheless try to proceed, the court may rely on its inherent jurisdiction to prevent a petition being presented. Moreover, treating the winding-up court as a tool for chasing debts amounts to an abuse of process. Yet there remains controversy over what amounts to a ‘genuine dispute’. This Practice Note reviews scenarios in which petition debts have been challenged and identifies key principles that emerge from the authorities and recent case law guidance and relevant commentary...

Introduction This Practice Note sets out a concise outline of the applicable tests for cashflow and balance sheet insolvency under section 123 of the Insolvency Act 1986 (IA 1986). It focuses, in particular, on the position in light of the Supreme Court’s leading judgment in BNY Corporate Trustee Services v Eurosail-UK 2007-3BL (the Eurosail decision)... The two tests IA 1986, s 122(1)(f) permits the court to wind up a company that cannot meet its debts (see Practice Note: Compulsory liquidation—issuing a petition). Under IA 1986, s 123(1)(e), a company is deemed unable to pay its debts if it is proved to the court’s satisfaction that it cannot pay debts as they fall due (the ‘cashflow insolvency’ test). In addition, under IA 1986, s 123(2), a company is likewise deemed unable to pay its debts if it is proved to the court’s satisfaction that the value of its assets is less than the amount of its liabilities, taking into account contingent and prospective liabilities (the ‘balance sheet insolvency’...

Frequently Asked Questions—clients, investors or trade creditors These FAQs are provided solely for guidance in relation to the Special Administration of [ insert company ] and the Investment Bank Special Administration (England and Wales) Rules 2011, SI 2011/1301. You should seek your own legal and other professional advisers for advice in relation to your claim. General FAQs What is a special administration? The Investment Bank Special Administration Regulations 2011, SI 2011/245 were brought in to enhance the process when an investment bank collapses or fails. [ Set out the distinctions from ordinary administration, the statutory objectives underpinning a special administration, the possibility of forming a creditors' committee, together with how costs are to be met in practice, eg the costs and expenses of returning client assets are to be paid out of relevant client assets and other costs and expenses are to be paid out of the Company’s own/firm assets. ] Who are Special Administrators? Special...