woman working girl sitting

Insolvency is classically described as an inability to pay debts as and when they become payable. 

Insolvency is generally thought of as bankruptcy however bankruptcy applies to natural persons whereas insolvency applies to both natural persons and companies – but for these purposes, we’ll focus on corporate insolvency.

A company is usually insolvent when it is experiencing an ‘endemic shortage of working capital’ as opposed to a temporary lack of liquidity.  Insolvency becomes a question then of fact necessary to be determined by a court with the aid of expert evidence usually provided by accountancy firms.  

There will often be indicators of insolvency looked for by such expert witnesses to assist in forming an opinion.

The laws provide that rebuttable assumptions of insolvency may apply in certain circumstances, so if your company is or soon will be facing an inability to pay debts as and when they become payable, that would be a time to engage help.