What Is the Test of Insolvency in India?
By  sakshi jaiswal  |  21 Nov 2016  |  Upvotes: 0  | 

1 Answer(s)

Tushar Bhargava

For the courts commercial insolvency of a company means that the company is unable to pay its liabilities as they arise in the normal course of business. In applying this test, the courts ascertain whether a company is able to meet its current liabilities or those anticipated to occur in the future and whether the company has enough existing assets to meet such liabilities.
Under the Companies Act, a “sick” industrial company is an industrial company that at the end of any financial year had accumulated losses that have eroded 50 percent or more of its average net worth during the four years immediately preceding that financial year, or has failed to repay debts to its creditor(s) within three consecutive quarters on demand made in writing for such repayment.

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