What Is Insolvent Trading?

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The terminology in the business world can be quite perplexing, particularly when it comes to money matters, but understanding the many stringent rules associated with finances is critical to a company’s survival and success. Ideally, a business thrives, and owners can focus on laws related to financial reporting, stock offerings and money management, but it’s equally important to follow the correct legal rules and procedures when a business is struggling financially.

If a company’s financial difficulties progress to the point of insolvency — a state that occurs when the company can no longer pay its debts — very specific rules must be followed to ensure that insolvent trading doesn’t occur. To help you better understand the rules and repercussions, we’ve put together this quick guide to explain insolvent trading claims and related topics like liquidation and bankruptcy.