Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Discuss the latest legal developments, ask questions, and share best practice with other LexisPSL subscribers
Has the Supreme Court clarified ‘balance sheet’ insolvency?
Kathy Stones spoke to Christopher Boardman, barrister at 11 Stone Buildings, who believes the decision in Eurosail (BNY Corporate Trustee Services Ltd and others v Neuberger Berman Europe Ltd (on behalf of Sealink Funding Ltd) and others  All ER (D) 107 (May)) will be welcomed by directors but less by creditors and liquidators.
In a unanimous judgment handed down last Thursday (9th May 2013), the Supreme Court confirmed the ‘balance sheet’ test insolvency of the IA 1986, s 123 is not a mechanical exercise of comparing the value of a company’s assets against the value of its liabilities, but a more sophisticated test requiring a judgment as to whether the present assets of a company will reasonably enable the company’s present and future liabilities to be met. In so doing, their Lordships rejected the ‘point of no return’ test formulated by Lord Neuberger MR in the Court the Appeal.
A clear definition of inability to pay debts is often said to be ‘fundamental’ to any system of insolvency law. An insolvent company may be compulsorily wound-up by the court on the ground that it is ‘unable to pay its debts’. Insolvency is a necessary condition for setting aside a preference or a transaction at an undervalue. A company’s inability to pay its debts is a commonly found ‘event of default’ in commercial contracts. As the Eurosail case shows, the determination of this question may be pivotal to the outcome for creditors.
The circumstances in which a company is to be ‘deemed unable to pay its debts’ under the IA 1986, s 123 include:
The former is commonly referred to as ‘cash-flow’ insolvency and the latter
Free trials are only available to individuals based in the UK
* denotes a required field
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial. See our full terms here.
Access this article and thousands of others like it free by subscribing to our blog.
Read full article
Already a subscriber? Login
0330 161 1234