If a company is bankrupt, does that mean it is insolvent? If so, does the same logic apply the other way round? In other words, if a company is insolvent, does that mean it is bankrupt? In this column, I will explore the meaning of these terms, in English and Chinese. I will also consider when bankruptcy (or insolvency) proceedings against companies may be initiated, under English law and Chinese law.
The meaning of the words in English
Let’s start with “insolvent”. The word insolvent means that a person or entity is unable to repay his, her or its debts. The opposite word, solvent, is based on the Latin word solvere, meaning “to loosen” or “to dissolve”. In the context of debts, it means to dissolve one’s debts, or to free oneself from one’s debts.
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.