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Clifford Chance

Clifford Chance


Subordinated noteholders strike sail: balance sheet insolvency in the Supreme Court

9 May 2013

The Supreme Court has unanimously affirmed the Court of Appeal's decision on the test for balance sheet insolvency under section 123(2) of the Insolvency Act 1986 finding that Eurosail was not balance sheet insolvent. Of practical importance to borrowers and their lenders is the rejection by the Supreme Court of the "point of no return" formulation of the test enunciated by Lord Neuberger in the Court of Appeal. Lord Walker stressed that this should not be used as shorthand for what will in each case be a highly fact-specific and complex assessment of a debtor's future and contingent liabilities.

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