Insolvency

Insolvency may take the form of an inability to make payments or over-indebtedness.

A debtor is insolvent if they have multiple creditors, have financial liabilities that are more than 30 days overdue, and are unable to honour those liabilities. Debtors are considered to be insolvent in particular if they have stopped paying off a substantial portion of their financial liabilities or fail to honour such liabilities for more than three months after they fall due, or if any of the due monetary claims against the debtor cannot be satisfied by enforcement or execution.

By contrast, a business that keeps accounts is considered to be solvent if the difference between the amount of its cash liabilities and the amount of its available assets is less than one tenth of the amount of those cash liabilities, or if this difference falls below 10% in a matter of weeks.

A debtor that is a business (whether as a legal entity or an individual) is also insolvent if over-indebted. Debtors are over-indebted if they have multiple creditors and the sum of their liabilities exceeds the value of their assets.

Impending insolvency means a situation where, taking into account all of the circumstances, it can reasonably be assumed that debtors will be unable to meet a substantial part of their financial liabilities in a due and timely manner.

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