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...

UK COVID-19 insolvency reforms: CIGA 2020 moratorium and restructuring plan, wrongful trading and winding-up changes, supply protections, commercial rent arbitration and Breathing Space Regulations

Published by a LexisNexis Commercial expert

Practice notes

Background

The coronavirus (COVID-19) crisis has severely affected businesses worldwide, leaving many at genuine risk of Insolvency. In response, some jurisdictions have temporarily amended their insolvency regimes to support companies (and their Directors) and individuals, given ongoing uncertainty about how long the crisis will last and what its enduring consequences will be. This Practice Note examines the UK position. For information on reforms in other countries, see: Coronavirus (COVID-19) Tracker of insolvency reforms globally [Archived].

Previous proposals for reform

On 26 August 2018, the government issued its response to consultations on Insolvency and Corporate Governance, setting out several intended changes to UK insolvency law. The proposals included:

a moratorium available to all companies, giving time to develop restructuring proposals without creditor pressure
a new ‘restructuring plan’, a formal process enabling companies to cram down dissenting creditors
a ban on enforcing contractual provisions that permit termination on an insolvency event in contracts and licences for the supply of goods and services
an increase in the maximum sum to be set aside from floating charge realisations under the prescribed part...

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Web page updated on 22/05/2026

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