English High Court confirms strict payment rule for solvent liquidations

The High Court has considered whether a company must convert from a solvent liquidation to an insolvent liquidation when it becomes clear that debts cannot be paid within the required timeframe.

Background

Novalpina Capital LLP (NCL) was placed into a members' voluntary liquidation (MVL) in May 2023. An MVL is used when directors believe that a company can pay all its debts within 12 months, whilst a creditors' voluntary liquidation (CVL) is for insolvent companies.  However, Noal SCSp (Noal), a Luxembourg fund, brought a damages claim against NCL in Luxembourg and submitted a proof of debt in the liquidation totalling over £247 million.

Decision

The High Court ruled that the MVL must be converted to a CVL. The court found that the Insolvency Act 1986 provides a clear test for an MVL – a strict 12-month payment period, not a general balance sheet insolvency test.

The court held that Noal's claim was a contingent liability and must be properly valued under the Insolvency Rules, and since any realistic valuation would have been above zero, this triggered the conversion requirement. 

Key takeaways

• Companies in MVL must genuinely be able to pay all debts within 12 months - this is a strict payment test, not merely about overall solvency. 
• When the statutory timeframe expires without full payment, conversion to CVL becomes mandatory. This decision reinforces that the MVL regime requires genuine confidence in rapid debt settlement, protecting creditors from inappropriate use of the MVL procedure.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.

Noal SCSp (a Luxembourg private equity fund) and others v Novalpina Capital LLP (in members voluntary liquidation) and others [2025] EWHC 1392 (Ch)