The parties disputed the validity of the appointment of a receiver. The ostensible ground for appointment of the receiver was not made out, but the bank relied on a new ground, section 223(d) of the 1948 Act. Nicholls LJ observed: ‘Construing this section first without reference to authority, it seems to me plain that, in a case where none of the deeming paras (a), (b) or (c) is applicable, what is contemplated is evidence of (and, if necessary, an investigation into) the present capacity of a company to pay all its debts. If a debt presently payable is not paid because of lack of means, that will normally suffice to prove that the company is unable to pay its debts. That will be so even if, on an assessment of all the assets and liabilities of the company, there is a surplus of assets over liabilities. That is trite law.
It is equally trite to observe that the fact that a company can meet all its presently payable debts is not necessarily the end of the matter, because para (d) requires account to be taken of contingent and prospective liabilities. Take the simple, if extreme, case of a company whose liabilities consist of an obligation to repay a loan of andpound;100,000 one year hence, and whose only assets are worth andpound;10,000. It is obvious that, taking into account its future liabilities, such a company does not have the present capacity to pay its debts and as such it ‘is’ unable to pay its debts.’
Judges:
Nicholls, Slade and Neill LJJ
Citations:
[1987] BCLC 232
Statutes:
Citing:
Cited – In Re European Life Assurance Society 1869
Sir William James V-C dismissed a petition for the winding up of a company which had issued large numbers of life policies and annuity contracts, and appeared to be in financial difficulties. He rejected the basis of the ‘just and equitable’ ground . .
Cited – In re a Company (Bond Jewellers) ChD 21-Dec-1983
A tenant company had a propensity for postponing payment of its debts until threatened with litigation. Nourse J felt unable to make an order under section 223(d), and considered, but ultimately did not make an order, on the ‘just and equitable’ . .
Cited – In Re Capital Annuities Ltd ChD 1979
Slade J said: ‘From 1907 onwards, therefore, one species of ‘inability to pay its debts’ specifically recognised by the legislature as a ground for the making of a winding up order in respect of any company incorporated under the Companies Acts was . .
Cited by:
Cited – BNY Corporate Trustee Services Ltd and Others v Neuberger SC 9-May-2013
Potential Insolvency effect under guarantee
The various parties had entered into complex and substantial financial arrangements incorporating guarantees. The guarantees were conditional upon the guaranteed party being solvent. The parties disputed whether a party which would otherwise be . .
Cited – In re Cheyne Finance Plc (No 2) ChD 17-Oct-2007
The court was asked as to the treatment of the assets of the company in case of a future insolvency.
Held: Briggs J decided section 123(1)(e) required: ‘In my judgment, the effect of the alterations to the insolvency test made in 1985 and now . .
Lists of cited by and citing cases may be incomplete.
Company, Insolvency
Updated: 04 May 2022; Ref: scu.535118