INSOLVENCY

insolvency,n.1. The condition of being unable to pay debts as they fall due or in the usual course of business. 2. The inability to pay debts as they mature. — Also termed failure to meet obligations; failing circumstances. See BANKRUPTCY(2). Cf. SOLVENCY.

balance-sheet insolvency.Insolvency created when the debtor’s liabilities exceed its assets. • Under some state laws, balance-sheet insolvency prevents a corporation from making a

distribution to its shareholders. — Also termed balance-sheet test.

equity insolvency.Insolvency created when the debtor cannot meet its obligations as they fall due. • Under most state laws, equity insolvency prevents a corporation from making a distribution to its shareholders.

[Blacks Law 8th]