4 ms·

If this was a UK company, they were actively trading while insolvent are up for jail time. In Florida? Who the hell knows, but I imagine trading while insolvent

If this was a UK company, they were actively trading while insolvent are up for jail time. In Florida? Who the hell knows, but I imagine trading while insolvent is still illegal. It's a very old bit of corporate law the US probably took from the UK when it was formed.

patio11 11y ago
Bitcoiners have an interesting understanding of the word "insolvent." Insolvency simply means more liabilities than assets. That is a natural state for many businesses; debt is a thing which exists and can be used responsibly. (Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. This is perfectly compatible with normal operation -- assuming no cash flow issues they happily service the loan, operate the business, and make payroll.) The wrinkle is when you're insolvent and also a financial institution, which has been a critical failure mode since the Medicis.
- Lazare 11y ago
  You may know this, but that's really not how accounting law or bankruptcy law works, at least in the US. > Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. That's simply wrong. Many companies have more assets than liabilities; Revlon, for example has around $2 billion in assets and $2.5 billion in liabilities last I looked, but they're not insolvent or in any particular danger of becoming so; the market values them as being worth around $1.5 billion. At least in the US, insolvency is a question of cash flow. Your example SaaS company is able to service its debts and make payroll, thus it is solvent. The fact that it might have negative shareholder equity is quirk of accounting that nobody really worries about. (If you already knew that, my apologies.)
- thomaskcr 11y ago
  > Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. I don't think that is right. Yes, they have more in liabilities than assets but insolvency would mean that you can't service your currently due debt. If you took out a loan with a $5000/mo payment, you would not be insolvent until you cannot make that payment. In the case of an exchange, that liability doesn't have a future due date - so they would be insolvent once they do not have the assets to cover their liabilities.
- maxerickson 11y ago
  Brief reading suggests that the wrinkle is whether you have a good faith belief that you will be able to make future payments.
- gamblor956 11y ago
  In the US, for tax purposes (and most federal legal purposes), "insolvent" simply means unable to pay debts. It is only when a corporation is liquidating that it matters (for purposes of determining insolvency) if liabilities exceed assets.

patio11 11y ago

Bitcoiners have an interesting understanding of the word "insolvent." Insolvency simply means more liabilities than assets. That is a natural state for many businesses; debt is a thing which exists and can be used responsibly. (Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. This is perfectly compatible with normal operation -- assuming no cash flow issues they happily service the loan, operate the business, and make payroll.) The wrinkle is when you're insolvent and also a financial institution, which has been a critical failure mode since the Medicis.

Lazare 11y ago
You may know this, but that's really not how accounting law or bankruptcy law works, at least in the US. > Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. That's simply wrong. Many companies have more assets than liabilities; Revlon, for example has around $2 billion in assets and $2.5 billion in liabilities last I looked, but they're not insolvent or in any particular danger of becoming so; the market values them as being worth around $1.5 billion. At least in the US, insolvency is a question of cash flow. Your example SaaS company is able to service its debts and make payroll, thus it is solvent. The fact that it might have negative shareholder equity is quirk of accounting that nobody really worries about. (If you already knew that, my apologies.)
thomaskcr 11y ago
> Imagine a SaaS company which takes out a loan for $100k to acquire customers and has $10k in bank at any time. That company is insolvent. I don't think that is right. Yes, they have more in liabilities than assets but insolvency would mean that you can't service your currently due debt. If you took out a loan with a $5000/mo payment, you would not be insolvent until you cannot make that payment. In the case of an exchange, that liability doesn't have a future due date - so they would be insolvent once they do not have the assets to cover their liabilities.
maxerickson 11y ago
Brief reading suggests that the wrinkle is whether you have a good faith belief that you will be able to make future payments.
gamblor956 11y ago
In the US, for tax purposes (and most federal legal purposes), "insolvent" simply means unable to pay debts. It is only when a corporation is liquidating that it matters (for purposes of determining insolvency) if liabilities exceed assets.