What is Insolvency?
Insolvency refers to a financial situation where a company is unable to repay its debts as they fall due. Both individuals and companies can become insolvent, though the term is more commonly used in relation to companies.
What is Bankruptcy?
On the other hand, bankruptcy is a legal process that applies to individuals who cannot meet their financial obligations to repay their debt. It is a legal process that requires a bankruptcy Order to be made, whereas insolvency describes a state of financial distress.
Section 123 of the Insolvency Act 1986 defines the inability to pay debts if there is an unsatisfied statutory demand or an unsatisfied judgement or if it can be proved that the assets are exceeded by the liabilities.
