Consolidating balance sheet definition
Companies can be put into Voluntary Administration, Creditors Voluntary Liquidation & Court Liquidation.
Secured creditors with registered charges are able to appoint Receivers and Receivers & Managers depending on their charge.
Balance sheet insolvency involves having negative net assets—where liabilities exceed assets.
Insolvency is not a synonym for bankruptcy, which is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency.
As governments are sovereign entities, persons who hold debt of the government cannot seize the assets of the government to re-pay the debt.
The recourse for the creditor is to request to be repaid at least some of what is owed.
The outcome of an insolvent restructuring can be very different depending on the laws of the state in which the insolvency proceeding is run, and in many cases different stakeholders in a company may hold the advantage in different jurisdictions.
In Australia Corporate insolvency is governed by the Corporations Act 2001 (Cth).
It can be, in several jurisdictions, grounds for a civil action or even an offence, to continue to pay some creditors in preference to other creditors once a state of insolvency is reached.
However, in most cases, debt in default is refinanced by further borrowing or monetized by issuing more currency (which typically results in inflation and may result in hyperinflation).
Insolvency regimes around the world have evolved in very different ways, with laws focusing on different strategies for dealing with the insolvent.
Cash-flow insolvency can usually be resolved by negotiation.
For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty.
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Insolvency is the state of being unable to pay the money owed, by a person or company, on time; those in a state of insolvency are said to be insolvent.