Jurisdiction(s):
United Kingdom

Related legal acts

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...

Corporate Insolvency and Governance Act 2020: implications for construction contracts—termination restrictions (IA 1986 s233B), moratorium, restructuring plans, adjudication and Crown preference

Published by a LexisNexis Construction expert

Practice notes

The Corporate Insolvency and Governance Act 2020 (CIGA 2020)

CIGA 2020 emerged as part of the government’s measures addressing the economic shock of the coronavirus (COVID-19) crisis. Alongside other changes, it added fresh provisions to the Insolvency Act 1986 (IA 1986), aimed at keeping supplies flowing to companies facing financial distress and finding it hard to pay their supplier, and at curbing the exercise of certain contractual rights in agreements for the sale and supply of goods when insolvency occurs. CIGA 2020 carries notable consequences for the construction sector. The rules most likely to affect participants in construction contracts are the limits on a supplier’s ability to terminate, or to do ‘any other thing’, where the customer has become insolvent, under IA 1986, s 233B (brought in by CIGA 2020, s 14). Within a construction setting, the customer for these CIGA 2020 rules will be the employer under a main contract or a consultant’s appointment, or, for sub-contracts, the main contractor. For simplicity, this Practice Note describes the supplier as the ‘contractor’, and the customer as the ‘employer’. These measures are especially relevant to construction supply obligations. The legislation does not include a definition of a contract ‘for the supply...

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Web page updated on 21/05/2026

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