Insolvency Act 1986
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The JC’s Reg and Leg resource™
UK Edition
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If you’re the sort of fellow who is interested in bankruptcy and insolvency — and in this day and age, who isn’t? — then Section 123 of the Insolvency Act 1986 (see here) is one you might have some interest in, containing as it does definitions of balance sheet insolvency and cashflow insolvency.
As you will know from the JC’s other perorations on the topic, there is an important distinction between accounting insolvency as a financial state, and bankruptcy as a legal procedure.
The Insolvency Act 1986 is more focused on the legal procedures and consequences that follow from insolvency, rather than the accounting analysis used to determine insolvency. While it provides the legal framework, the rules for determining insolvency derive from other sources such as accounting standards and case law.
More about insolvency
- The two two varieties of insolvency: cashflow insolvency and balance sheet insolvency
- The difference between insolvency and bankruptcy
- Bankruptcy shenanigans
- ISDA’s delightful Bankruptcy definition — the gold standard of its kind.