What is Insolvency under German Law?
In simple terms, insolvency means the inability to pay one’s creditor. In legal terms, a company is insolvent if it is only able to pay less than 90% of its liabilities over a period of at least three weeks and therefore has ceased the payments. If the management realises that it cannot meet its financial obligations anymore, or not longer than throughout the next 12 months, the threat of insolvency is apparent. The basic legal sources governing the issue in Germany are the Insolvency Regulation (Insolvenzverordnung – InsO) and the Avoidance of Transactions Act.