The definition of insolvency is a key element of the insolvency law. It opens the gate for tools that enable creditors to safeguard their rights vis-à-vis their debtors. On 19 August 2019, the Czech Supreme Court published a ground-breaking decision which addresses a crucial aspect of balance-sheet insolvency. Many other issues, however, still remain unresolved.
As in other jurisdictions, the Czech Insolvency Act anticipates two forms of insolvency: cash-flow insolvency (illiquidity test) and balance-sheet insolvency (overindebtedness).