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What does ‘reasonably practicable’ mean in paragraph 3(3) of Schedule B1 to the Insolvency Act 1986?

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Published on: 15 October 2019
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The purpose of Administration is set out in paragraph 3 of Schedule B1 to the Insolvency Act 1986 (IA 1986):

‘(1) The administrator of a company must perform his functions with the objective of—

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or

(c) realising property in order to make a Distribution to one or more secured or preferential creditors.’

IA 1986, Sch B1, para 3(3) states that the administrator must perform their functions with the objective specified in IA 1986, Sch B1, para 3(1)(a) above, unless they thinks either—

‘(a) that it is not reasonably practicable to achieve that objective, or

(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company's creditors as a whole.’

The objectives in IA 1986, Sch B1, para 3(1) are hierarchical. Therefore, the

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Insolvency definition
What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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