Unable to pay its debts: Difference between revisions

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The statutory definition of [[insolvency]] in the UK appears at Section 123 of the [[Insolvency Act 1986]], and reads thus.
#redirect[[insolvency]]
 
Quick note: Section 123(1)(e) is [[cashflow insolvency]], and Section 123(2) is [[balance sheet insolvency]].
 
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'''123 Definition of inability to pay debts. '''
:(1) A company is deemed [[unable to pay its debts]]—
::(a) if a creditor (by assignment or otherwise) to whom the company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company’s registered office, a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, or
::(b) if, in England and Wales, execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part, or
::(c) if, in Scotland, the induciae of a charge for payment on an extract decree, or an extract registered bond, or an extract registered protest, have expired without payment being made, or
::(d) if, in Northern Ireland, a certificate of unenforceability has been granted in respect of a judgment against the company, or
::(e) if it is proved to the satisfaction of the court that the company is [[unable to pay its debts as they fall due]]<ref>This is [[cashflow insolvency]]</ref>.
:(2) A company is also deemed [[unable to pay its debts]] if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities. <ref>This is “[[balance sheet insolvency]]”.</ref>
:(3) The money sum for the time being specified in subsection (1)(a) is subject to increase or reduction by order under section 416 in Part XV.
}}
 
 
===See also===
*[[insolvency]]
*{{isdaprov|bankruptcy}} - the {{ISDA}} term
*[[cashflow insolvency]]
*[[balance sheet insolvency]]

Latest revision as of 19:22, 4 February 2024

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