Corporate insolvency

A company becomes insolvent if it does not have enough assets to cover its debts and/or it cannot pay its debts on the due dates. It is the directors’ responsibility to know whether or not the company is trading while insolvent and they can be held legally responsible for continuing to trade in that situation. The decision to appoint receivers, liquidators and administrators is the responsibility of the appropriate funding bodies (ie banks and lending institutions), creditors, the courts or the company itself, depending on the procedure.

General

Insolvency in the UK is:

•
governed by Insolvency Act 1986 (IA 1986) and Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024
•
subject to the jurisdiction of the High Court and designated County Courts

Companies in financial difficulty may be subject to various insolvency procedures, including:

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company voluntary arrangements (CVAs)
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administration
•
administrative receivership
•
voluntary winding-up (by creditors or members)
•
compulsory winding-up (by the court)

Spurred on by the coronavirus (COVID-19) pandemic and a desire to mitigate the effect on businesses of the government-imposed lockdown, the government expedited new insolvency legislation, resulting in CIGA

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