“Balance sheet insolvency test” questioned by Supreme Court

By May 14, 2013Insolvency

The UK Supreme Court has delivered a significant ruling on the issue of balance sheet insolvency tests within insolvency court cases.

The ruling upheld a decision by the Court of Appeal (March 2011) in BNY Corporate Trustee Services v Eurosail UK that the existence of a deficit between assets and liabilities was not in itself sufficient reason to declare a firm insolvent.

Oliver Glynn-Jones, finance dispute resolution partner at BLP LLP, representing Eurosail in the case, warns of the implications that the ruling may have on future insolvency cases.

He explains: “The Supreme Court’s judgment that a court must approach the question of balance sheet insolvency with caution and that the onus is on a petitioning party to demonstrate on the balance of probabilities that there will be insufficient assets to meet liabilities is likely to deter some parties from petitioning on this basis.”
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