INSOLVENTS :

 INSOLVENTS :

Insolvency is civil death

Sec 4 of Insolvency Act 1920 – It is a state of Bankruptcy

Bankruptcy – Legal status of a person or organisation – imposed by Court order 

• An insolvent person cannot be a partner in a firm (S.34 of Partnership Act) including a sleeping partner.

• An insolvent person cannot be a director of a company (S.164 of new Companies Act)

• An insolvent person can be an agent, trustee, secretary etc 

• An un-discharged insolvent is a person who is unable to repay his liabilities

• Bank should stop operations on the joint account when one of the joint account holder becomes insolvent irrespective of mode of operation

• In the case of an insolvent, the Official Receiver will be the true owner to receive the money belonging to that person. 

If a credit is received, it should not be credited to insolvent but only to Official Receiver.

Rationale: Banks do not open account for un-discharged insolvent.  Assets of insolvent person rest with official receiver appointed by court.  Banks may have to handover the deposit to official receiver in case such an account is opened.

Liquidation: Company/Business/Firm terminated. After creditors are paid share holders get the remaining.