A more thorough explanation:

Failing circumstances refer to the condition of being unable to pay debts as they fall due or in the usual course of business. It is also known as insolvency.

• Balance-sheet insolvency: This happens when a debtor's liabilities exceed its assets. For instance, if a company owes more money than it has in assets, it is considered balance-sheet insolvent. This type of insolvency prevents a corporation from making a distribution to its shareholders.
• Equity insolvency: This occurs when a debtor cannot meet its obligations as they fall due. For example, if a company cannot pay its bills on time, it is considered equity insolvent. This type of insolvency also prevents a corporation from making a distribution to its shareholders.

These examples illustrate how failing circumstances or insolvency can affect a company's ability to pay its debts and meet its obligations. When a company is insolvent, it may have to file for bankruptcy or restructure its debts to avoid going out of business.