Jurisdiction(s):
United Kingdom

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...

Placing a solvent company into MVL: directors’ decisions, statutory declaration of solvency, shareholder resolutions, chargee and creditor notices, and Companies House filings (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

A members’ voluntary liquidation (MVL) occurs when a company is solvent and an orderly wind-up of the company is required.

For more detail, refer to the following Practice Notes:

What is a members’ voluntary liquidation and when is it typically used?
MVL—the information and documents to be provided to the liquidator by the company

The procedure is set in motion at a board meeting once the directors conclude the company can settle all its debts in full, together with interest at the official rate, within no more than 12 months from the start of the winding up. A company can be wound up voluntarily under members’ control only where a majority of the directors have made a statutory declaration of solvency and provided a statement of the company’s assets and liabilities (along with the other matters required by insolvency (England and Wales) Rules 2016, SI 2016/1024, r 5.1). This must be done during the five weeks immediately before the resolution to wind up is passed, or on that day but before the resolution is approved...

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Simon Hunter

Three Stone

Simon was called to the Bar in 2009 and practices in chancery and commercial law from Three Stone. His practice has a particular emphasis on insolvency and property, but takes in the full range of chancery and commercial work done in his chambers. ...

Web page updated on 21/05/2026

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