One of the most common misconceptions in insolvency practice does not concern complex procedures but rather terminology. The terms “inability to pay,” “insolvency,” “over-indebtedness,” and “the presumption of inability to pay” are often used—even by professionals—as though they describe the same legal and economic reality. They do not. This confusion gives rise to both rejected insolvency petitions and incorrectly constructed defenses.

Irina Selevestru, Doctor of Law and insolvency expert, examines these issues in her commentary for Curentul.md.

1. The Presumption of Inability to Pay — A Procedural Construct, Not an Economic Diagnosis

Under Article 2 of Insolvency Law No. 149/2012, as currently in force, the presumption of inability to pay applies where the debtor owes a single creditor an amount exceeding ten average national salaries and has failed to make payment for more than 60 days.

It is worth noting that prior to the amendments introduced by Law No. 313/2024, the provision referred only to the requirement of a payment delay exceeding 60 days. The monetary threshold applicable to a single creditor was introduced only through that law, which entered into force in February 2025.

This legislative framework leads to an important conclusion that is not emphasized often enough: the law grants every creditor the right to file an insolvency petition whenever three conditions are met:

• the creditor holds documents establishing the claim;
• the claim has remained unpaid for more than 60 days after becoming due; and
• the value of the claim exceeds the statutory threshold.

Nothing more is required.

The legislature does not require the creditor to verify the debtor’s bank balances, the value of its assets, the structure of its balance sheet, or any financial indicators. This is entirely logical because, objectively speaking, a creditor has no means of determining the debtor’s financial position. Creditors have no access to the debtor’s bank accounts, accounting records, or internal corporate documentation.

To require such verification as a condition for admissibility would effectively deprive creditors of access to collective insolvency proceedings. The creditor’s role ends with filing the petition; the economic assessment belongs to someone else.

Three important clarifications should be made in this context.

First, the statutory conditions are cumulative. A payment delay alone is insufficient if the claim does not reach the statutory threshold. Likewise, the amount alone is insufficient if the payment has not been overdue for more than sixty days.

Second, the law makes no distinction based on the nature of the claim. The obligation may be commercial, fiscal, employment-related, or arise from interest, penalties, fines, or any other source. What matters is that it is a monetary obligation that has fallen due, not its legal origin. The statutory definition of inability to pay expressly includes tax obligations.

Third—and most importantly—the presumption is rebuttable.

It does not establish insolvency. Rather, it merely shifts the burden of proof.

The debtor may rebut the presumption by demonstrating that:

• the obligation has already been fulfilled;
• civil proceedings concerning that obligation had already been initiated before the insolvency petition was filed; or
• the obligation can be extinguished through set-off against a counterclaim of equal or greater value.

In other words, the presumption is an instrument that grants access to collective insolvency proceedings, not a legal conclusion regarding the debtor’s actual financial condition.

2. Insolvency — A Measurable Economic Condition

This is where the second major misconception arises.

Insolvency cannot be established merely because a single invoice remains unpaid. It is an economic condition of a debtor’s estate, determined through an analysis of financial indicators calculated exclusively on the basis of the debtor’s accounting records—its financial statements, trial balance, and accounting registers.

In practice, the analysis generally relies on three categories of financial ratios:

• liquidity ratios;
• solvency and financial autonomy ratios; and
• the debt coverage ratio.

The last of these deserves particular attention because it is also the one most frequently misunderstood.

The debt coverage ratio is calculated by comparing the debtor’s total available financial resources with its total outstanding liabilities.

Both components of the ratio are aggregate figures:

• the numerator includes all available cash held in bank accounts and cash registers;
• the denominator includes all of the debtor’s liabilities, irrespective of the creditor involved, the nature of the obligation, or whether that creditor has filed an insolvency claim.

The ratio is not calculated by comparing one particular debt with the funds available in the debtor’s bank account.

This leads to a fundamental observation:

The presumption established by Article 2 relates to a single creditor and does not take into account the amount of money available in the debtor’s bank accounts.

The law contains no exception stating that the presumption does not apply if the debtor has sufficient funds on deposit.

There is a simple reason for this: the mere existence of money in a bank account proves neither that payment has been made, nor that the debtor intends to pay, nor that it is capable of satisfying all of its due obligations.

A classic example illustrates this principle.

In February 2009, Trump Entertainment Resorts filed for protection under Chapter 11 after failing to make an interest payment of USD 53.1 million that had fallen due on December 1, 2008.

This was a company operating three Atlantic City casinos—Trump Taj Mahal, Trump Plaza, and Trump Marina—an enterprise possessing substantial assets and generating significant daily cash revenues.

No one could seriously argue that the company had no money in its bank accounts. On the contrary, it held assets worth more than one billion dollars.

Nevertheless, insolvency proceedings were commenced.

Accordingly, a debtor may simultaneously:

• owe one creditor a substantial overdue debt while maintaining a debt coverage ratio that rules out insolvency; or
• possess fully funded bank accounts while exhibiting a disastrously poor debt coverage ratio.

These two mechanisms—the presumption, which is individual and procedural, and the economic analysis, which is comprehensive and aggregate—serve entirely different purposes and cannot replace one another.

Confusing the procedural threshold with an economic diagnosis amounts to misunderstanding the entire structure of insolvency law.

3. Article 10 — The General Ground and the Special Ground

The Insolvency Law distinguishes between two separate grounds for commencing insolvency proceedings. In practice, however, these two grounds are consistently confused.

The general ground is inability to pay—that is, a shortage of liquidity or the absence of sufficient cash to satisfy obligations that have fallen due.

This ground does not necessarily require that the debtor’s assets be worth less than its liabilities. In comparative legal terminology, it is commonly referred to as the cash-flow test.

Determining whether this ground exists is not a legal exercise but an accounting and financial assessment. Three important points should be emphasized, although they are frequently overlooked in practice.

First, the debt coverage ratio is not calculated by reference to the debt relied upon in the insolvency petition. The claim of the petitioning creditor enjoys no privileged status; it is merely one component of the debtor’s total liabilities reflected in the denominator of the ratio.

Second, the ratio is not calculated solely on the basis of the claims filed by creditors who join the proceedings. The aggregate value of claims submitted in the insolvency case is not the same as the debtor’s total liabilities. The former reflects only what creditors have declared; the latter is determined from the debtor’s accounting records.

Third, the calculation is performed independently by the interim insolvency administrator, based on the accounting documents provided by the debtor.

It is not performed by the creditor, who has no access to those documents.

It is not performed by the debtor, who is an interested party.

Nor is it based merely on statements made during court hearings.

The special ground is over-indebtedness.

This ground may be invoked only with respect to a legal entity that is liable to creditors solely within the limits of its own assets. When assessing the debtor’s financial position, the evaluation must be based on the assumption that the business will continue as a going concern, provided such continuation is feasible.

This is essentially a balance-sheet test: liabilities exceed assets.

It is precisely here that the most persistent misconception arises.

The debtor’s standard response—“The company owns assets worth millions and has substantial funds in its bank accounts; how can anyone claim it is insolvent?”—does not address the general ground at all. Instead, it addresses an entirely different legal concept.

The existence of substantial assets is relevant to determining over-indebtedness.

It is irrelevant to determining inability to pay, which measures liquidity, not wealth.

A company may own real estate worth tens of millions and still be unable to pay its debts because those properties cannot be used to pay this month’s salaries.

A non-liquid asset is not a means of payment.

4. How These Concepts Are Reflected in International Standards

The UNCITRAL Legislative Guide on Insolvency Law adopts precisely the distinction reflected in Article 10 of the Moldovan Insolvency Law: the liquidity test (cessation of payments) and the balance-sheet test.

The Guide recommends the liquidity test as the principal standard for opening insolvency proceedings because the balance-sheet test depends heavily on the methods used to value assets and may therefore produce results that do not accurately reflect the debtor’s actual ability to meet its obligations.

Accordingly, the approach adopted by Moldovan law—a general liquidity-based ground combined with a special balance-sheet-based ground of limited application—is fully consistent with international standards rather than being a purely domestic innovation.

Within the European Union, Regulation (EU) 2015/848 leaves the definition of insolvency to the legislation of each Member State.

Meanwhile, Directive (EU) 2019/1023 introduces a concept that precedes insolvency itself: the likelihood of insolvency, which serves as the threshold for access to preventive restructuring frameworks.

This follows the same logic as Article 13 of the Moldovan Insolvency Law, which allows a debtor to file an insolvency petition where there is a foreseeable risk of becoming unable to pay its debts.

The process of legislative harmonization is continuing. In March 2026, the European Parliament adopted a new legislative instrument aimed at harmonizing certain aspects of insolvency law across the European Union. As a result, insolvency reform is expected to remain on Moldova’s legislative agenda as well.

5. Practical Implications

For creditors

The presumption of inability to pay does not relieve a creditor of the obligation to verify the three statutory requirements:

• the existence of a document establishing the claim;
• the expiration of more than sixty days since the debt became due; and
• the statutory monetary threshold being met.

However, the law requires nothing beyond these conditions.

These requirements are now supplemented by recently introduced procedural obligations, including the duty to exhaust available pre-trial recovery mechanisms, mediation among them, before filing an insolvency petition.

For debtors

Opposing an insolvency petition merely by arguing that the company owns substantial assets or has considerable funds in its bank accounts does not constitute a legal defence.

Insolvency is not disproved through assertions but through accounting data, independently verified by the interim insolvency administrator.

Since the statutory presumption is rebuttable, it may be overturned only in three clearly defined ways:

• by proving that the debt has been paid;
• by proving that litigation concerning the debt was already pending before the insolvency petition was filed; or
• by proving that the debt is subject to set-off against a counterclaim.

The presumption cannot be rebutted by documents prepared solely for the court hearing or by emotional arguments unsupported by evidence.

For legal practitioners

The distinction between the presumption of inability to pay, inability to pay itself, and over-indebtedness is far more than an academic nuance.

It is the dividing line between an admissible insolvency petition and one that will be dismissed, and between an effective legal defence and one that is merely decorative.

Ultimately, insolvency law lies at the intersection of law and accounting.

Anyone who approaches it from only one of these perspectives will inevitably reach the wrong conclusion—no matter how convinced they may be that they understand it.