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...

CVA Modifications Before Creditors’ Approval: Permissible Changes, Consent Requirements, Process and HMRC Expectations (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Modifications to company voluntary arrangements (CVAs)

There is limited statutory direction on how CVA modifications should be approached. Some direction appears in Statements of insolvency Practice (SIP) 3.2.

Alterations to a CVA proposal are acceptable, so long as they do not:

reshape the CVA so extensively that it is no longer a CVA at all (for example, a change compelling the company to enter administration would be impermissible)
restrict, vary, or diminish a secured creditor’s right to realise its security without that creditor’s express consent
reorder distributions so that any preferential creditor loses priority over non-preferential creditors without that creditor’s express consent
upset the rule that all preferential creditors share dividends pari passu without the disadvantaged creditor’s express consent

Amendments affecting preferential creditors cannot be approved merely because a majority of preferential creditors agree; each affected preferential creditor must consent. Creditors or members may propose modifications before the proposal is considered...

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Lexa Hilliard , KC

Wilberforce Chambers

Lexa Hilliard KC is a popular and well-respected silk who is recommended by the legal directories for commercial dispute resolution, commercial chancery, company, insolvency and professional negligence. Her expertise also covers arbitration, banking and finance as well as fraud. She is particularly known for her cross-border litigation experience, often involving an insolvency or civil fraud angle. Clients note that she is: 'keenly commercial, incredibly passionate and works seamlessly with the team' and that she has: 'hugely impressive advocacy skills and strategic input'. She regularly handles high value, legally complex cases in both the domestic and international market, acting both as advocate and expert. Her ability to be 'highly inventive and always think of new ways to approach a case" allied to her: "no-nonsense approach" ensure her success with judges and tribunals as well as clients....

Web page updated on 21/05/2026

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