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...

Insolvency expenses in liquidation, bankruptcy and administration: classification, prioritisation and key authorities (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

What are expenses?

All Fees, Costs, charges and any other outgoings arising during a winding up (Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, rr 6.42 and 7.108), administration (IR 2016, SI 2016/1024, r 3.50) or bankruptcy (IR 2016, SI 2016/1024, r 10.148) are treated as expenses of the relevant winding up, administration or, as applicable, the bankruptcy...

For liquidation and bankruptcy, the applicable provisions are IR 2016, SI 2016/1024, r 6.42 (creditors’ voluntary winding up), IR 2016, SI 2016/1024, r 7.108 (winding up by the court) and IR 2016, SI 2016/1024, r 10.149 (bankruptcy). As many of these provisions are framed in almost identical terms, the following observations apply across all three rules. Whether spending by a liquidator or a trustee in bankruptcy (trustee) qualifies as an expense of the liquidation or the bankruptcy is not a matter over which the court has any discretion. The position depends solely on whether the particular expenditure falls within one of the specified categories...

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William Willson

South Square Chambers

William Willson was called to the Bar in 2006 after a career as a journalist/documentary producer. His core areas of practice include insolvency/restructuring, company law and commercial litigation/arbitration. His recent cases include the Lehman Brothers 'RASCALS' litigation ([2011] EWCA Civ 1544, [2010] EWHC 2914 (Ch)) and the Northern Rock shareholder compensation litigation ([2011] UKUT 408 (TCC)). ...

Sam Laughton

Ten Old Square

Sam Laughton’s practice encompasses a broad range of Chancery litigation and advisory work, with a particular focus on both commercial, private and agricultural disputes relating to property. He is particularly skilled in multidisciplinary litigation, drawing on his expertise in: land contracts; restrictive covenants and easements; commercial and residential landlord and tenant; personal and corporate insolvency; commercial disputes and company law; family and corporate trusts; wills, probate and the administration of estates; and professional negligence arising out of these fields....

Web page updated on 21/05/2026

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