Jurisdiction(s):
United Kingdom

Key definition

Insolvency definition

What does Insolvency mean? In practice, insolvency describes a financial state where a debtor cannot meet liabilities when due, triggering remedies such as administration, liquidation or bankruptcy and informing directors’ duties and avoidance claims. For companies in England & Wales, Scotland and Northern Ireland, the Insolvency Act 1986, s 123 sets two alternative tests: - Cash‑flow insolvency: an inability to pay debts as they fall due. The inquiry is practical and forward‑looking, not confined to today’s bills (Re Patrick & Lyon Ltd [1933] Ch 786; BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28). - Balance‑sheet insolvency: liabilities (including contingent and prospective liabilities) exceed assets on...

Claims against companies subject to a CVA: binding effect, accrual timing, section 6 Insolvency Act 1986 challenges, and enforcing post‑CVA debts

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

This Practice Note outlines key points to bear in mind when someone intends to start a claim against a company subject to a company voluntary arrangement (CVA). It does not address the process for placing a company into a CVA, the overall impact of a CVA, or the avenues for challenging one. For further reading on these areas, see:

Practice Note: In what circumstances can a CVA be proposed and by whom?
Practice Note: The CVA proposal and procedure
Overview: Company voluntary arrangements
Practice Note: Proprietary claims

Practical issues to consider before bringing a claim against a company subject to a CVA

Is the claimant bound by the CVA?

The initial question for any claimant is whether they are bound by the CVA’s terms and, as a result, are likely prevented from pursuing a claim. In broad terms, a company’s creditor is bound by the CVA, even if they voted against its approval or were not notified of the creditors’ decision-making process regarding its implementation...

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Web page updated on 21/05/2026

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