Insolvency law does not exist in a vacuum and insolvency rules can influence the behavior of a debtor or stakeholder in the normal course of business. Interestingly, English law does not provide a definition of "insolvency", but rather provides various tests of "inability to pay debts" and it is therefore up to the courts to decide the question of solvency. Indeed, a clear definition of “inability to pay debts” has been called “fundamental” to any system of bankruptcy law. The Insolvency Act 1986 (the "Act") deems a company to be unable to pay its debts after satisfying any of a number of tests, the most important of which are the cash flow insolvency tests and the budget. The Eurosail case is therefore crucial as it concerned the concept of balance sheet testing as set out in Article 132(2) of the Act. The Eurosail case was so significant that when the Court of Appeal heard it, the residential mortgage-backed securities (RMBS) market held its breath, as the earlier case had implications for holders of notes in other transactions with poorly performing assets or broken currency hedges. , and could have made other RMBS companies insolvent with bad swaps. Lord Neuberger, with whom Toulson and Wilson LJ agreed, endorsed Professor Goode's view that, in order for s. 123, paragraph 2, of the law, to be satisfied, it would be necessary for the company to have reached the "point of no return". The Supreme Court however rejected the tipping point test for establishing balance sheet insolvency and made clear that the correct test was the need to satisfy the court, on the balance of probabilities, that a company did not have sufficient assets to be able to meet all its liabilities, including contingent and contingent liabilities. ..or fundamental to any system of insolvency law, both the courts and Parliament need to reintroduce some certainty on the issue. Conclusion The Supreme Court's decision is welcome news for distressed debt holders in particular and financial market participants in general. The “point of no return” test adopted by the Court of Appeal has posed a major obstacle for parties seeking to enforce insolvency in complex commercial scenarios. However, greater clarity is needed on the assessment of budget insolvency, whether in the form of an amendment to the Insolvency Act 1986 or in the documentation used by lawyers and contract document drafters. It is my opinion that the industry will be notified of an amendment merging the cash flow test and the balance sheet test or via contractual clauses as to which test will be used to trigger an act of default.