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...

Scotland: Company voluntary arrangements—proposals, members’ and creditors’ decisions, and supervision under ISCVAAR 2018 (as amended)

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Practice notes

The Corporate Insolvency and Governance Act 2020 (CIGA 2020), effective from 26 June 2020, removes the small-company moratorium under Schedule A1 to the Insolvency Act 1986 (IA 1986), replacing it with a new standalone moratorium. For more detail, see Practice Note: Corporate Insolvency and Governance Act 2020—moratorium and News Analysis: Corporate Insolvency and Governance Act 2020—company moratorium (Scotland).

The Insolvency (Scotland) (Company Voluntary Arrangement and Administration) Rules 2018 (ISCVAAR 2018), SI 2018/1082, were laid before the UK Parliament on 15 October 2018 and came into force on 6 April 2019. The Insolvency (Scotland) (Receivership and Winding Up) Rules 2018 (ISRWR 2018), SSI 2018/347, were laid before the Scottish Parliament on 14 November 2018 and likewise commenced on 6 April 2019. The existence of two rule sets reflects the devolved settlement and the respective responsibilities of the Scottish and UK parliaments for corporate insolvency processes. As a result, certain provisions are mirrored and both sets are cited where rules overlap. The ISCVAAR 2018, SI 2018/1082 and the ISRWR 2018, SSI 2018/347 are intended to modernise and consolidate the Insolvency (Scotland) Rules 1986...

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Web page updated on 22/05/2026

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