Inability to pay or insolvency means that a natural person or legal entity isn't able to pay it's costs and bills through it's own cash-flow, i.e. regular income isn't sufficient to pay the regular costs. In most of such cases also the credit limit is used up. Often this ends in giving up the company and ceasing commercial operation.
In Airlinesim the balance of the bank account is the criteria to determine when an enterprise isn't able to pay, as there is no overdraft credit to pay leasing installments or salaries from. If you're unable to pay the leasing rate of an aircraft your enterprise is considered inable to pay in that specific moment. Therefore the leasing contract will be immediately terminated, the aircraft is returned to the lessor and the security deposit (minus the leasing rate) is refunded to your bank account. If you're unable to pay for the salaries of your employees consequences are more serious: If your enterprise is inable to pay during week-end closing the enterprise will be liquidated.
Therefore it's a regular danger that due to inobservance or miscalculation by the user even an healthy enterprise can become unable to pay. It's an important advise to calculate accurate and try to have some cash on your bank account plus try to build some reserves, if your enterprise is making profit. Also a timetable helps you to oversee your fix costs (leasing rates, ground handling), loans and salaries plus predicted dividend payout.
If an enterprise is liquidated due to inability to pay at the time of week-end closing or if the enterprise is given up in the meantime, it'll be liquidated as follows:
- Aircrafts are returned to the lessor (security deposit is refunded minus leasing costs) or marketed (15% of its book-value).
- Employees are layed-off (salaries plus compensation are payed)
- Loans payed off (interests are calculate pro rata)
- buildings will be demolished (cost a fee)
The amount being left over are liquidation is payed out to the superordinate enterprise, the liquidation is finished.