Balance sheet insolvency

See Bankruptcy - the ISDA Master Agreement definition.

Unable to pay its debts is a seemingly dangerously vague expression that features in many definitions of insolvency or bankruptcy, but which has a pretty technical meaning when you dig into it.

Section 123(2) of the Insolvency Act 1986 provides that a company will be deemed unable to pay its debts “if it is proved to the satisfaction of the court that the value of the comany’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities”.