Definition of insolvency

When individuals or businesses do not have enough assets to cover their debts (balance sheet test), or cannot pay their debts when they are due (cashflow test).

In some countries the definition is important and the test for a company's insolvency differ. For example, in Germany, if the company fails a balance sheet test, its directors have 21 days to file for insolvency proceedings.

There is no comparable rule in the UK except for that it is illegal to trade while insolvent. [1]