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...

CVA proposals: creditor claims, notice and decision procedures, voting and valuation, secured/contingent debts, majorities, and challenge/appeal (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

The Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024 set out the overarching framework for decision-making across all formal insolvency processes. Although decision procedures specifically appear in IR 2016, SI 2016/1024, Pt 15, company voluntary arrangements (CVAs) are instead covered in IR 2016, SI 2016/1024, Pt 2. For a further general guide to decision-making, see Practice Note: Voting and creditors' decision procedures.

Creditor claims

There is no express statutory definition of ‘creditor’ in the Insolvency Act 1986 (IA 1986) or IR 2016, SI 2016/1024 for the purposes of a CVA. For individual voluntary arrangements (IVAs), the expressions ‘debt’ and ‘liability’ are each defined to embrace ‘debts or liabilities which are present or future, certain or contingent or in respect of an amount which is fixed or liquidated or is capable of being ascertained by fixed rules or as a matter of opinion’, and the term ‘creditor’ is defined by reference to ‘bankruptcy debt’. In the sphere of CVAs, the word ‘creditor’ should not be construed narrowly or restrictively. As indicated below, a contingent creditor is also a creditor for these purposes. In short, the scope and nature of creditors’ claims in relation to CVAs in this practice area...

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William Willson

South Square Chambers

William Willson was called to the Bar in 2006 after a career as a journalist/documentary producer. His core areas of practice include insolvency/restructuring, company law and commercial litigation/arbitration. His recent cases include the Lehman Brothers 'RASCALS' litigation ([2011] EWCA Civ 1544, [2010] EWHC 2914 (Ch)) and the Northern Rock shareholder compensation litigation ([2011] UKUT 408 (TCC)). ...

Nora Wannagat

Tanfield Chambers

Nora became a member of Tanfield Chambers in September 2024. Prior to that, she was a member of 9 Stone Buildings, after successful completion of her pupillage there. She is developing a broad commercial and chancery practice with an emphasis on insolvency. She is frequently instructed as sole counsel, but has also acted as a junior in a substantial fraud case involving more than 25 contested hearings. She has written about one of them here: The effect of debarring orders in complex fraud cases (Re Grosvenor Property Developers Ltd (in liquidation)), Lexis PSL...

Web page updated on 21/05/2026

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