Is My Business Insolvent?

The Insolvency Act lays down a few simple insolvency tests, two of which stand out:

• Balance sheet test – Are your assets less than your liabilities? If yes, you are insolvent. If no, you are probably not insolvent, however;

• Cash flow test – Can you pay your debts as they fall due (e.g. pay by 19th of the following month)? If yes, you are not cashflow insolvent. If no, you are probably trading insolvently and might have a problem.