United Kingdom: High Court ruling on the balance sheet test for solvency of companies

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A summary of the decision in the recent High Court case of BNY Corporate Trustee Services Limited -v- Eurosail-UK 2007-3BL plc and others [2010]. The Court held that in determining whether or not a company was insolvent on a balance sheet basis the Courts should value the company's assets at their present value, ignoring contingent or prospective assets. On the other hand contingent and prospective liabilities ought to be taken into account. The article examines to what extent contingent and prospective liabilities must be taken into in circumstances where they may not fall in as actual liabilities for many years or at all.

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