Question

Who is called Insolvent person?

Options

• When his/her personal assets are insufficient.

• When his/her debit capital balance cannot be covered.

• Both When his/her personal assets are insufficient and When his/her debit capital balance cannot be covered.

• None of the above

Answer 1

Both When his/her personal assets are insufficient and When his/her debit capital balance cannot be covered.

Explanation:

Insolvency occurs when a person is unable to contribute totally or substantially to the discharge of his or her responsibilities from his or her private assets. A partner is deemed insolvent in the following two situations:

1. When he or she has insufficient personal assets.
2. When his or her debit capital amount is insufficient to cover it.