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The 'balance sheet' test of corporate insolvency

In the recent case of BNY Corporate v Eurosail[1], the Court of Appeal for the first time considered how the 'balance sheet' test of corporate insolvency in section 123(2) Insolvency Act 1986 (IA 1986) should be applied.

Section 123(2) IA 1986 provides:-

'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.'

United Kingdom, Insolvency & Restructuring, Litigation, Wedlake Bell, Interest, Debt, Liability (financial accounting), Legal burden of proof, Liquidation, Balance sheet, Insolvency Act 1986 (UK), Court of Appeal of England & Wales
It might be thought that the statutory prohibition of litigating against a company in administration (without permission of the court) has worldwide effect; but does it?

Background

Administration

Administration is a procedure by which a company can be reorganised and its assets realised whilst being protected by a moratorium from actions brought by creditors (explained below).  

Objectives

A company can be put into administration if the objectives of administration are likely to be achieved. These are set out in the Insolvency Act 1986 (the “Act”)4 as:  

Global, United Kingdom, Insolvency & Restructuring, Litigation, Wedlake Bell, Unsecured debt, Injunction, Landlord, Debt, Liquidation, Moratorium, Capital punishment, Unsecured creditor, Insolvency Act 1986 (UK)