There are two tests for insolvency:
- The balance sheet test says a business will be insolvent if all its liabilities will become greater than all its assets.
- The cash flow test says a business will be insolvent if it will not be able to pay its debts as they become due in the usual course of business.
MBCA § 6.40(c).
A company cannot distribute a dividend if it will make it insolvent.