What is an Insolvent?

Insolvent means that a person or a company enters a state in which he can’t pay any of his debts. If a firm goes to insolvency then it would be considered fraudulent misrepresentation if the director would still continue on trading and he will be directly held responsible for the companies state.

If a seller finds out that his buyer is insolent then he can reclaim his goods within a certain time period. The best way to determine if a company is insolent or not is to check if it has more liabilities then assets though this doesn’t mean every time that it’s in an insolent state. When this state arises then the company has a few options left the first is re-structuring and there’s liquidation and of course declaring bankruptcy.