See also: Insolvency and Bankruptcy

The causes of corporate failure, at least in the market segment of the economy, all begin of the creation of credit and debt.[19] Occasionally excessive debts are run up through outright embezzlement of the company's assets or fraud by the people who run the business.[20] Negligent mismanagement, which is found to breach the duty of care, is also sometimes found.[21] More frequently, companies go insolvent because of late payments. Another business on which the company relied for credit or supplies could also be in financial distress, and a string of failures could be part of a broader macroeconomic depression.[22] Periodically, insolvencies occur because technology changes which outdates lines of business. Most frequently, however, businesses are forced into insolvency simply because they are out-competed. In an economy organised around market competition, and where competition presupposes losers or contemplates excess, insolvencies necessarily happen.[23] The variety of causes for corporate failure means that the law requires different responses to the particular issues, and this is reflected in the legal meaning of insolvency.
Meaning of insolvency
See also: Insolvency and Bankruptcy
Most insurance companies and banks would be insolvent if all policy and account holders required payments all at once. Instead, the main test of insolvency is whether a company can pay its debts as they fall due.