Q&As

Can an energy supplier apply for a declaration of inability to pay its debts under section 123 of the Insolvency Act 1986 where Ofgem is not a party to the application, there is no supplier of last resort, and no respondents?

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Published on LexisPSL on 11/02/2022

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can an energy supplier apply for a declaration of inability to pay its debts under section 123 of the Insolvency Act 1986 where Ofgem is not a party to the application, there is no supplier of last resort, and no respondents?

Can an energy supplier apply for a declaration of inability to pay its debts under section 123 of the Insolvency Act 1986 where Ofgem is not a party to the application, there is no supplier of last resort, and no respondents?

It is assumed for the purposes of this reply that the ‘respondents’ are people who would dispute the claim that the energy supplier is insolvent.

 

While the Insolvency Act 1986 (IA 1986) provides no definition of insolvency, IA 1986, s 123, provides the statutory definition (or tests) that determine a company's inability to pay their debts and this is used for practical purposes as the definition of insolvency.

The most common ways of establishing an inability to pay debts are where:

  1. a creditor has issued a statutory demand for a debt that has remained unpaid 21 days after the date of the statutory demand (or the same relevant procedure in Scotland and Northern Ireland) (see IA 1986, s 123(1)(a))

  2. the company is unable to pay its debts as they fall due (commonly referred to as 'cash flow insolvency' (see IA 1986, s 123(1)(e)

  3. the value of the company’s assets is less than the amount

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