What is the solvency test?
The solvency test is set out at section 527 of the Companies Law and contains two key elements. Firstly, the company must be able to pay its debts as they become due and secondly the value of the company’s assets must be greater than the value of its liabilities. Companies which are “supervised companies” for the purposes of the Companies Law (which essentially means entities licensed by the Guernsey Financial Services Commission in respect of banking, fiduciary, insurance or investment business in Guernsey) must also satisfy additional requirements arising under the applicable regulatory legislation. In determining whether a company’s assets are greater than its liabilities the directors must have regard to the most recent accounts of the company and all other circumstances which the directors know or ought to know affect (or may affect) the value of the company’s assets and its liabilities. The directors may rely on valuations of assets or estimates of liabilities that are reasonable
