Hi Chan4stocks. You should look at the Australian rules when...

Hi Chan4stocks. You should look at the Australian rules when discussing solvency as they vary greatly between countries. Most directors are mindful that the Australian Corporations Act defines solvency as the capacity to pay all debts as and when they become due or believes they will have the capacity at the time. If not the company is insolvent.

Insolvency in Australia is in itself a problem. There are various penalties for trading while insolvent (check the ASIC webpage) but directors can become liable for debts if they occur while the company is insolvent.