Solvency Test
/ˈsɒlvənsi tɛst/
Definitions
- (n.) A legal assessment to determine whether a company or individual can meet their debts as they become due, ensuring financial stability before undertaking certain transactions.
The court applied the solvency test before approving the merger to confirm the company’s financial health.
Forms
- solvency test
- solvency tests
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Commentary
Typically applied in corporate law contexts, solvency tests help prevent actions like unlawful distributions or inefficient asset transfers that could harm creditors.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.