Insolvency Clause

See: Insolvency. See: Bankruptcy. See: Chapter 11. See: Chapter 7.

The whole "clause" thing after insolvency has nothing to do with Santa. In fact, it's kind of the opposite. Many times, lenders add their own contractual language for what happens should a company become insolvent, i.e. unable to pay its bills. You'll see this often when a larger distribution partner is loaning money to a manufacturer of a product they distribute.

The big distributor wants that product and the company's patents or brands or intellectual properties, should the manufacturer go bust. What the big gun doesn't want is for that company to go to auction and then have a competitor buy them, thus taking away all the hard work the distributor did initially to build relationships with retailers selling that product along the way. Think: Darwin.