♦ Insolvency is the inability of a person or corporation to pay their bills as and when they become due and payable.
♦ The word ‘Insolvency‘ can be used for everyone who is unable to pay their dues whether it is body corporate, company, limited liability partnership, partnership firm, individual, HUF, body of individuals.
♦ Insolvency is the trigger that causes a bankruptcy or liquidation.
INSOLVENCY RESULTS IN TWO WAYS :
NOTE: Insolvency may not necessarily lead to bankruptcy or liquidation. Insolvency can be rectified through increasing income or reducing expenses rather than filing for bankruptcy or liquidation.
ULTIMATELY, INSOLVENCY IS A STATE OR CONDITION AND BANKRUPTCY IS A FORMAL DECLARATION.