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...

Director disqualification: comprehensive overview of grounds, procedure and undertakings under the Company Directors Disqualification Act 1986 and Insolvency Act 1986 (including application to LLP members)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Director disqualification

A number of routes exist for removing a person from office as a director of a limited liability company. Most frequently, this occurs by reason of ‘unfit conduct’ while serving as a director of an insolvent company, pursuant to section 6 of the Company directors Disqualification Act 1986 (CDDA 1986). That said, further and less commonly used provisions within CDDA 1986 and the insolvency Act 1986 (IA 1986) also permit the disqualification of a company director. Whichever statutory route is relied upon, the effect on the disqualified individual is broadly identical and is explained in more detail in Practice Note: What is prohibited for a disqualified director? By virtue of CDDA 1986, s 7, applications for a disqualification order under s 6 are made either by the Secretary of State for Business and Trade (SoS) or, on the SoS’s direction, by the official receiver (OR) in compulsory winding up cases only. They perform equivalent functions, and references to the SoS are to be read as including the OR...

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Giselle McGowan

Serle Court

Giselle McGowan has a commercial chancery practice with a particular emphasis on insolvency and indirect tax litigation. Giselle is regularly instructed by office-holders, directors, creditors and/or debtors in a variety of personal and corporate insolvency matters including disputed petitions, misfeasance, breach of duty and wrongful and fraudulent trading claims and applications to set aside antecedent transactions. As Junior Counsel to the Crown, B Panel, Giselle is frequently instructed by HMRC and BEIS in insolvency, director disqualification and indirect tax matters. Prior to joining the independent bar, Giselle was an employed barrister at HMRC Solicitor’s Office, working in the Enforcement and Insolvency and VAT teams....

Web page updated on 21/05/2026

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