Section 112. Solvency test

(1) For the purposes of provisions relating to redemption of preference shares, reduction of share capital and financial assistance, a company satisfies the solvency test in relation to a transaction if—

(a) immediately after the transaction there will be no ground on which the company could be found to be unable to pay its debts;

(b) either—

(i) it is intended to commence the winding up of the company within twelve months after the date of the transaction, the company will be able to pay its debts in full within twelve months after the commencement of the winding up; or

(ii) in any other case, the company will be able to pay its debts as the debts become due during the period of twelve months immediately following the date of the transaction; and

(c) the asset of the company is more than the liability of the company at the date of the transaction.

(2) For the purpose of share buyback, a company satisfies the solvency test if—

(a) the share buyback would not result in the company being insolvent and its capital being impaired at the date of the solvency statement; and

(b) the company will remain solvent after each buyback during the period of six months after the date of the declaration made under subsection 113(5).

(3) For the purposes of subsection (2)—

(a) a company shall be deemed to be solvent if it is able to continue to meet its debts as and when the debts become due without any substantial disposition of its assets outside the ordinary course of its business, restructuring its debts, externally forced revisions of its operations or other similar actions;

(b) the capital of a company shall be deemed to be impaired when the value of its net assets is less than the aggregate amount of all the shares of the company after the share buyback.