Zone of Insolvency is a concept describing when a company is approaching insolvency such that creditor interests become increasingly relevant in board decision-making, and transactions may face heightened scrutiny for solvency and fraudulent transfer risk. In M&A and financing contexts, Zone of Insolvency considerations can affect fiduciary analysis, documentation, and the use of special committees, and operating in the Zone of Insolvency often prompts boards to seek enhanced financial advice and solvency analyses.
