We advise on the tests to determine insolvency, such as the cash flow test and the balance sheet test, and on compulsory liquidation.
We advise on whether a company is insolvent and the consequences under insolvency law that flow from that, in particular, the different tests to determine insolvency, including:
- Failing to comply with a statutory demand for a debt of over £750
- Failing to satisfy enforcement of a judgment debt
- The Cash Flow Test: the court being satisfied that the company is unable to pay its debts as they fall due
- The Balance Sheet Test: the court being satisfied that the liabilities of the company (including contingent and prospective liabilities) exceed the assets of the company
Where a company is unable to pay its debts under any of the tests set out in section 123 of the IA 1986 (which includes the cash flow and balance sheet tests), a creditor may petition for the company to be placed into compulsory liquidation.