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United Kingdom
United Kingdom
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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...
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Investigations by the Insolvency Service and Official Receiver: directors’ misconduct, public/private examinations, data protection, privilege and enforcement in England, Wales and Scotland (Archived)
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Practice notes
Archived: This Practice Note has been archived and is no longer being updated.
The Insolvency Service examines companies that have entered formal insolvency proceedings, including Administration, administrative Receivership, and voluntary liquidation, throughout England, Wales and Scotland. These enquiries arise once a company is formally insolvent.
Who may the Insolvency Service investigate?
The Insolvency Service may enquire into those who have exercised control over a company, regardless of whether they are labelled a director. Beyond appointed directors and individuals acting as directors without lawful appointment, the Service can scrutinise the behaviour of shadow directors and others who directed a director, later disqualified, to behave in an unfit way. In relation to a company, a shadow director is a person whose directions or instructions the company’s directors are accustomed to follow. The Company Directors Disqualification Act 1986 (CDDA 1986) extends to both natural persons and corporate bodies that act as directors of other companies alike.
The Official receiver
The office of official receiver was established by the Bankruptcy Act 1883, with the aim of placing greater official oversight on bankruptcy matters generally, and on investigations in particular. The purpose was to ensure tighter official control over bankruptcy proceedings in general, and especially over investigations...
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Web page updated on 22/05/2026
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