Solvency and liquidity test
A Companies Act test used to assess whether a company can pay its debts and whether its assets exceed its liabilities after a proposed action.
Definition
The solvency and liquidity test can matter for distributions, share buy-backs, financial assistance, restructuring, director decisions, business rescue, and liquidation risk. The review usually needs current financial records, board resolutions, forecasts, creditor pressure, contingent liabilities, and the exact transaction being approved.
Key takeaways
A Companies Act test used to assess whether a company can pay its debts and whether its assets exceed its liabilities after a proposed action.
Corporate Law
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Related legal problems
This glossary provides general information only and does not constitute legal advice.
Common situations
Director liability risk
Business rescue risk
Company distribution approval
Related resources
Resources and guides
FAQs
Solvency and liquidity test FAQs
What does Solvency and liquidity test mean?
A Companies Act test used to assess whether a company can pay its debts and whether its assets exceed its liabilities after a proposed action.
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