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In
accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compare with other ob ...
, insolvency is the state of being unable to pay the
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
s, by a
person A person (plural people or persons) is a being that has certain capacities or attributes such as reason Reason is the capacity of consciously applying logic Logic is an interdisciplinary field which studies truth and reasoning Reason is ...
or
company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common pu ...

company
(
debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series ...
), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms:
cash-flow A cash flow is a real or virtual movement of cash, money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expec ...
insolvency and
balance-sheet
balance-sheet
insolvency. Cash-flow insolvency is when a person or company has enough
asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such a ...
s to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough
liquid A liquid is a nearly incompressible In fluid mechanics or more generally continuum mechanics, incompressible flow (isochoric process, isochoric flow) refers to a fluid flow, flow in which the material density is constant within a fluid par ...
assets to pay a debt when it falls due. Cash-flow insolvency can usually be resolved by
negotiation Negotiation is a between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues. Negotiation is an interaction and process between ...
. For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty. Balance-sheet insolvency is when a person or company does not have enough assets to pay all of their debts. The person or company might enter
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
, but not necessarily. Once a loss is accepted by all parties, negotiation is often able to resolve the situation without bankruptcy. A company that is balance-sheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let the company pay that bill unless it will directly help all their creditors. For example, an insolvent farmer may be allowed to hire people to help harvest the crop, because ''not'' harvesting and selling the crop would be even ''worse'' for his creditors. It has been suggested that the speaker or writer should either say technical insolvency or actual insolvency in order to always be clear where technical insolvency is a
synonym A synonym is a word, morpheme A morpheme is the smallest meaningful lexical item in a language. A morpheme is not a word. The difference between a morpheme and a word is that a morpheme bound and free morphemes, sometimes does not stand alone, ...
for balance sheet insolvency, which means that its liabilities are greater than its assets, and actual insolvency is a synonym for the first definition of insolvency ("Insolvency is the inability of a debtor to pay their debt."). While technical insolvency is a synonym for balance-sheet insolvency, cash-flow insolvency and actual insolvency are not synonyms. The term "cash-flow insolvent" carries a strong (but perhaps not absolute) connotation that the debtor is balance-sheet solvent, whereas the term "actually insolvent" does not.


Technical definitions

Cash-flow insolvency involves a lack of
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business Business is the activity of making one's living or making money by producing or buying and selling ...
to pay debts as they fall due. Balance sheet insolvency involves having negative
net assets Net worth is the value of all the non-financial and financial asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and no ...
—where liabilities exceed assets. Insolvency is not a
synonym A synonym is a word, morpheme A morpheme is the smallest meaningful lexical item in a language. A morpheme is not a word. The difference between a morpheme and a word is that a morpheme bound and free morphemes, sometimes does not stand alone, ...
for
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
, which is a determination of insolvency made by a
court of law A court is any person or institution, often as a government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''Sta ...
with resulting legal orders intended to resolve the insolvency. Accounting insolvency happens when total liabilities exceed total assets (negative
net worth Net worth is the value of all the non-financial and financial asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that c ...
).


Consequences

The principal focus of modern insolvency
legislation Legislation is the process or product of enrolling, enacting, or promulgating Promulgation is the formal proclamation or the declaration that a new statute, statutory or administrative law is enacted after its final Enactment of a bill, appro ...
and business
debt restructuring Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress Financial distress is a term in corporate finance Corporate finance is the area of finance that deal ...
practices no longer rests on the
liquidation Liquidation is the process in accounting by which a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture o ...
and elimination of insolvent entities but on the remodeling of the financial and organizational structure of debtors experiencing
financial distress Financial distress is a term in corporate finance Corporate finance is the area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the fi ...
so as to permit the rehabilitation and continuation of their business. This is known as business turnaround or business recovery. Implementing a business turnaround may take many forms, including keep and restructure, sale as a going concern, or wind-down and exit. In some jurisdictions, it is an offence under the insolvency laws for a
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
to continue in business while insolvent. In others (like the United States with its
Chapter 11 Chapter 11 of the United States Bankruptcy Code ( Title 11 of the United States Code The Code of Laws of the United States of America (variously abbreviated to Code of Laws of the United States, United States Code, U.S. Code, U.S.C., or USC) i ...
provisions), the business may continue under a declared protective arrangement while alternative options to achieve recovery are worked out. Increasingly, legislatures have favored alternatives to winding up companies for good. It can be, in several jurisdictions, grounds for a civil action or even an offence, to continue to pay some
creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of people who have been invited by a host A host is ...

creditor
s in preference to other creditors once a state of insolvency is reached.


Debt restructuring

Debt restructurings are typically handled by professional insolvency and restructuring practitioners, and are usually less expensive and a preferable alternative to bankruptcy.
Debt restructuring Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress Financial distress is a term in corporate finance Corporate finance is the area of finance that deal ...
is a process that allows a private or public company - or a sovereign entity - facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its operations.


Government debt

Although the term "bankrupt" may be used referring to a government, sovereign states do not go bankrupt. This is so because bankruptcy is governed by national law; there exists no entity to take over such a government and distribute assets to creditors. Governments ''can'' be insolvent in terms of not having money to pay obligations when they are due. If a government does not meet an obligation, it is in "
default Default may refer to: Law * Default (law), the failure to do something required by law ** Default (finance) In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It ...
". As governments are
sovereign Sovereign is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French Old French (, , ; Modern French French ( or ) is a Romance language of the Indo-European family. It descende ...
entities, persons who hold debt of the government cannot seize the assets of the government to re-pay the debt. The recourse for the creditor is to request to be repaid at least some of what is owed. However, in most cases, debt in default is refinanced by further borrowing or monetized by issuing more
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed t ...

currency
(which typically results in
inflation In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a r ...

inflation
and may result in
hyperinflation In , hyperinflation is very high and typically accelerating . It quickly erodes the of the local , as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable forei ...

hyperinflation
).


Law

Insolvency regimes around the world have evolved in very different ways, with laws focusing on different strategies for dealing with the insolvent. The outcome of an insolvent restructuring can be very different depending on the laws of the state in which the insolvency proceeding is run, and in many cases different
stakeholders Stakeholder may refer to: *Stakeholder (corporate), a group, corporate, organization, member, or system that affects or can be affected by an organization's actions *Project stakeholder, a person, group, or organization with an interest in a projec ...
in a company may hold the advantage in different
jurisdictions Jurisdiction (from Latin ''Wikt:ius#Latin, juris'' 'law' + ''Wikt:dictio, dictio'' 'declaration') is the legal term for the authority granted to a legal entity to enact justice. Colloquially it is used to refer to the geographical area (: locatio ...
.Joseph Swanson and Peter Marshall,
Houlihan Lokey Houlihan Lokey, Inc., is an American multinational independent investment bank An investment bank is a financial services company or Corporate structure, corporate division that engages in advisory-based financial transactions on behalf of indiv ...
and Lyndon Norley, Kirkland & Ellis International LLP (2008). A Practitioner's Guide to Corporate Restructuring. City & Financial Publishing, 1st edition


Anguilla

In
Anguilla Anguilla ( ) is a British overseas territory The British Overseas Territories (BOTs), also known as United Kingdom Overseas Territories (UKOTs), are fourteen territories all with a constitutional and historical link with the United Kin ...

Anguilla
, the insolvency of individuals is regulated under the Bankruptcy Act (Cap B.15) and corporate insolvency is governed by the Bankruptcy Act (Cap B.15) or the Companies Act (Cap C.65).


Australia

In
Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...

Australia
, corporate insolvency is governed by the
Corporations Act 2001 The Corporations Act 2001 (Cth) (the Corporations Act, or CA 2001) is an Act of the Commonwealth of Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Aus ...
(Cth). Companies can be put into
Voluntary Administration As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions, similar to bankruptcy in the United States. It functions as a rescue mechanism for insolvent entities and allows them to carry ...
, Creditors Voluntary Liquidation, and Court Liquidation. Secured creditors with registered charges are able to appoint Receivers and Receivers & Managers depending on their charge.


British Virgin Islands

In the
British Virgin Islands ) , anthem = "God Save the Queen "God Save the Queen", alternatively "God Save the King" (dependent on the gender of the reigning monarch), is the or in most s, their territories, and the British . The author of the tune is unknown, an ...

British Virgin Islands
, insolvency law is primarily codified in the Insolvency Act, 2003 and the Insolvency Rules, 2005.


Canada

In
Canada Canada is a country in the northern part of North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean, Atlantic to the Pacific Ocean, Pacific and northward into the Arctic Oce ...

Canada
, bankruptcy and insolvency are generally regulated by the
Bankruptcy and Insolvency Act The ''Bankruptcy and Insolvency Act'' (BIA; french: Loi sur la faillite et l'insolvabilité)(the ''Act'') is one of the statutes that regulates Insolvency law of Canada, the law on Consumer bankruptcy in Canada, bankruptcy and Commercial insolvency ...
. An alternative regime is available to larger companies (or affiliated groups) under the
Companies' Creditors Arrangements Act The ''Companies' Creditors Arrangement Act'' (CCAA; french: Loi sur les arrangements avec les créanciers des compagnies) is a statute of the Parliament of Canada that allows insolvent corporations owing their creditors in excess of $5 million to ...
, where total debts exceed $5 million.


Germany

In
Germany ) , image_map = , map_caption = , map_width = 250px , capital = Berlin Berlin (; ) is the and by both area and population. Its 3,769,495 inhabitants, as of 31 December 2019 makes it the , according to population within city l ...

Germany
, insolvency proceedings are regulated by the Insolvency Act ''(Insolvenzordnung),'' in effect since 1999 but with significant changes in 2012. The goal of insolvency law is the equal and best satisfaction of creditors. If the interests of creditors are respected, insolvent companies are offered different ways to restructure their businesses, for example by implementing an 'insolvency plan' ''( Insolvenzplan)''. While regular insolvency proceedings are led by a court-appointed insolvency administrator, 'debtor-in-possession' proceedings are common since the legislative changes in 2012.


Hong Kong

In
Hong Kong Hong Kong (; , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR), is a List of cities in China, city and Special administrative regions of China, special administrative region of China on the ...

Hong Kong
, insolvency is primarily governed by the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) and the Companies (Winding Up) Rules (Cap 32H).


India

In
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...

India
, bankruptcy and insolvency are generally regulated by the
Insolvency and Bankruptcy Code The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lo ...
2016. The Insolvency and Bankruptcy Board of India (IBBI) is the regulator for overseeing insolvency ''proceedings'' and entities like Insolvency Professional Agencies (IPA), Insolvency Professionals (IP) and Information Utilities (IU) in
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...

India
.


Ireland

In
Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic. It is separated from Great Britain to its east by the North Channel (Great Britain and Ireland), North Channel, the Irish Sea ...

Ireland
, insolvency is governed by the Companies Act 2014.


Russia

In Russia, insolvency law is governed by Federal Law No. 127-FZ "On Insolvency (Bankruptcy)" and Federal Law No. 40-FZ "On Insolvency (Bankruptcy) of Credit Institutions".


South Africa

In
South Africa South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. With over Demographics of South Africa, 60 million people, it is the world's List of countries by population, 23rd-most ...

South Africa
, owners of businesses that had at any stage traded insolvently (i.e. that had a balance-sheet insolvency) become personally liable for the business' debts. Trading insolvently is often regarded as normal business practice in South Africa, as long as the business is able to fulfill its debt obligations when they fall due.


Switzerland

Under
Swiss Swiss may refer to: * the adjectival form of Switzerland , french: Suisse(sse), it, svizzero/svizzera or , rm, Svizzer/Svizra , government_type = Federalism, Federal semi-direct democracy under an assembly-independent Directorial ...

Swiss
law, insolvency or
foreclosure Foreclosure is a legal process in which a lender A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. ...
may lead to the seizure and auctioning off of assets (generally in the case of private individuals) or to
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
proceedings (generally in the case of registered commercial entities).


Turkey

Turkish insolvency law is regulated by Enforcement and Bankruptcy Law (Code No: 2004, Original Name: İcra ve İflas Kanunu). The main concept of the insolvency law is very similar to Swiss and German insolvency laws. Enforcement methods are realizing pledged property, seizure of assets and bankruptcy.


United Kingdom


Insolvency Act 1986

In the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shorth ...

United Kingdom
, the term
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
is reserved for individuals. Insolvency is defined both in terms of
cash flow A cash flow is a real or virtual movement of money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in ...
and in terms of
balance sheet In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such a ...

balance sheet
in the UK
Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of Parliament, Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the ...
, Section 123, which reads in part: A company which is insolvent may be put into
liquidation Liquidation is the process in accounting by which a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture o ...
(sometimes referred to as winding-up). The directors and
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal en ...
can instigate the liquidation process without court involvement by a shareholder resolution and the appointment of a licensed Insolvency Practitioner as liquidator. However, the liquidation will not be effective legally without the convening of a meeting of creditors who have the opportunity to appoint a liquidator of their own choice. This process is known as creditors voluntary liquidation (CVL), as opposed to members voluntary liquidation (MVL) which is for solvent companies. Alternatively, a creditor can petition the court for a winding-up order which, if granted, will place the company into what is called compulsory liquidation or winding up by the court. The liquidator realises the assets of the company and distributes funds realised to creditors according to their priorities, after the deduction of costs. In the case of Sole Trader Insolvency, the insolvency options include Individual Voluntary Arrangements and
Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

Bankruptcy
.


Procedures

It can be a civil and even a criminal offence for directors to allow a company to continue to trade whilst insolvent. However, two new insolvency procedures were introduced by the
Insolvency Act 1986 The Insolvency Act 1986c 45 is an Act of Parliament, Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK. History The Insolvency Act 1986 followed the ...
which aim to provide time for the rescue of a company or, at least, its business. These are Administration and Company Voluntary Arrangement: *Administration is a procedure to protect a company from its creditors in order for it to be able to make significant operational changes or restructuring so that it could continue as a going concern, or at least in order to achieve a better outcome for creditors than via liquidation. In contrast to Chapter 11 in the US where the directors remain in control throughout that restructuring process, in the UK an Administrator is appointed who must be a licensed Insolvency Practitioner to manage the company's affairs to protect the creditors of the insolvent company and balance their respective interests. Unless the company itself is saved by this process, the company is subsequently put into liquidation to distribute the remaining funds. *A Company Voluntary Arrangement (CVA) is a legal agreement between the company and its creditors, based on paying a fixed amount lower than the outstanding actual debt. These are normally based on a monthly payment, and at the end of the agreed term the remaining debt is written-off. The CVA is managed by a Supervisor who must be a licensed Insolvency Practitioner. If the CVA fails, the company is usually put into liquidation. One particular type of Administration that is becoming more common is called pre pack administration (more information under
administration (law) As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions, similar to bankruptcy in the United States. It functions as a rescue mechanism for insolvent entities and allows them to carry on r ...
). In this process, immediately after appointment the administrator completes a pre-arranged sale of the company's business, often to its directors or owners. The process can be seen as controversial because the creditors do not have the opportunity to vote against the sale. The rationale behind the device is that the swift sale of the business may be necessary or of benefit to enable a best price to be achieved. If the sale was delayed, creditors would ultimately lose out because the price obtainable for the assets would be reduced.


Receivership

In addition to the above-mentioned corporate insolvency procedures, a creditor holding security over an asset of the company may have the power to appoint an insolvency practitioner as administrative receiver or, in
Scotland Scotland ( sco, Scotland, gd, Alba Alba (Scottish Gaelic Scottish Gaelic ( gd, Gàidhlig or Scots Gaelic, sometimes referred to simply as Gaelic) is a Goidelic language (in the Celtic languages, Celtic branch of the Indo-European ...

Scotland
, receiver. The process, latterly known as
administrative receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property Property (''latin: Res Privata'') in the Abstract and concrete, abstract is wha ...
or, in Scotland, receivership, has existed for many years and has often resulted in a successful rescue of a company's business via a sale, but not of the company itself. Since the introduction of the collective insolvency procedure of Administration in 1986, the legislators have decided to set a shelf life on the
administrative receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property Property (''latin: Res Privata'') in the Abstract and concrete, abstract is wha ...
or, in Scotland, receivership procedure and it is no longer possible to appoint an administrative receiver or, in Scotland, receiver under security created after 15 September 2003. In individual cases the bankruptcy estate is dealt by an official receiver, appointed by the court. In some cases the file is transferred to RTLU (OR Regional Trustee Liquidator Unit) that will assess your assets and income to see if you can contribute towards paying costs of bankruptcy or even discharge part of your debts.


United States

Under the
Uniform Commercial Code The Uniform Commercial Code (UCC), first published in 1952, is one of a number of s that have been established as law with the goal of harmonizing the laws of sales and other commercial transactions across the United States through by all 50 , th ...

Uniform Commercial Code
, a person is considered to be insolvent when the party has ceased to pay its debts in the
ordinary course of businessIn United States law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the United States Constitution, which prescribes the foundation of the federal government of the United S ...
, or cannot pay its debts as they become due, or is insolvent within the meaning of the Bankruptcy Code. This is important because certain rights under the code may be invoked against an insolvent party which are otherwise unavailable. The
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
has established insolvency regimes which aim to protect the insolvent individual or company from the creditors, and balance their respective interests. For example, see
Chapter 11, Title 11, United States Code Chapter 11 of the United States Bankruptcy Code ( Title 11 of the United States Code The Code of Laws of the United States of America (variously abbreviated to Code of Laws of the United States, United States Code, U.S. Code, U.S.C., or USC) ...
. However, some state courts have begun to find individual corporate officers and directors liable for driving a company deeper into bankruptcy, under the legal theory of "deepening insolvency". In determining whether a gift or a payment to a creditor is an unlawful preference, the date of the insolvency, rather than the date of the legally declared bankruptcy, will usually be the primary consideration.


See also

*
Solvency Solvency, in finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money ...


References


Further reading

*


External links


Infographic Insolvency Risk Map Q2 2018 - Euler Hermes forecast
{{Authority control Debt Bankruptcy law legal terminology Insolvency law