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...

Liquidation, Creditors’ and Bankruptcy Committees (England and Wales): Establishment, Membership, Meetings, Conflicts, Office-holder Remuneration and Reporting under IA 1986 and IR 2016

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

The Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, prescribe the framework for Liquidation committees in both creditors’ voluntary windings-up and court windings-up, and for creditors’ committees in Administrations and administrative receiverships (collectively, committees).

General

A committee offers the office-holder a forum for consultation on strategy, including how funds might be deployed for particular investigations; nevertheless, in practice such committees are rarely set up. A committee must not intrude upon the office-holder’s statutory duties, nor oblige them to act in a manner they consider inappropriate. In addition to any powers granted by the Insolvency Act 1986 (IA 1986), the committee’s purpose is to assist the office-holder in performing their functions and to deal with the office-holder in whatever way may be agreed from time to time. For example, a liquidation committee provides both assistance and oversight in relation to the liquidation as a whole, with particular focus on the orderly realisation and administration of assets. In some instances, shareholders may be invited to participate on committees. A committee may be constituted under the IA 1986...

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Web page updated on 21/05/2026

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