Insolvency

Insolvency If a company is unable to pay its creditors because it doesn’t have liquid funds, it is technically insolvent. If a creditor presses for payment ad the company cannot pay within a short period, the creditor can sue the company and it may have to sell off some assets to meet the obligation. This is called technical insolvency. If, however, the company’s assets fall below its liabilities, it is insolvent in the sense of bankruptcy. If the Bankruptcy court declares the company bankrupt, its creditors are paid in a particular pecking order. See LIQUIDATION, BANKRUPTCY

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