Administration
Is a procedure which places a company under the control of an insolvency practitioner and the protection of the court. Administration is intended to fulfill one of the following objectives; rescuing the company as a going concern, or achieving a better result for the creditors as a whole than would be likely if the company were wound up without first being in administration. While a company is in administration creditors are prevented from taking any legal recovery action against it, except with the permission of the court. An administrator may be appointed either by an order of the court, on application by either, the company, its directors, one or more creditors, or, if it is in liquidation, its liquidator. Without a court order an administrator may be appointed, by direct appointment by the company, its directors or a creditor who holds comprehensive security of a type which qualifies him to make such an appointment.
Asset
Anything of value that belongs to the company and that may be used to repay a debt.
Asset Based Lender / Asset Based Lending
An organization that will advance funds to a company on the strength of the assets of its balance sheet, principally, debtors, stock, plant and machinery and property. The organization will normally take a debenture to secure their lending position.
Bankruptcy
The administration of the affairs of an insolvent individual, known as the debtor, by an Insolvency Practitioner ("IP"), known as the trustee in bankruptcy. The assets of the bankrupt's estate are realized for the benefit of the creditors.
Bankruptcy Order
A court order that declares an individual is bankrupt.
Bankruptcy Petition
A petition made to the court to request that an individual be made bankrupt. This can be made by a creditor or by the debtor.
Chattel Assets
This refers to any movable fixtures and fittings, such as desks, chairs and computers and so on, that can be sold towards repayment of a debt.
Company Voluntary Arrangement (CVA)
A procedure which enables an insolvent company to propose a repayment plan to its creditors. Under this plan, creditors agree to accept a lesser sum of money in full and final settlement of debts due to them by the company. An IP supervises this procedure.
Compulsory Liquidation
Also referred to as ‘compulsory winding up'. A liquidation procedure which is initiated by either a creditor, the company or a shareholder making a petition to the court, normally for unpaid debts which results in the court making a winding up order.
Creditor
A person or organization who is owed money by a company or an individual.
Creditors Voluntary Liquidation (CVL)
The most common liquidation procedure whereby shareholders, usually at the directors' request, pass a resolution to place a company into liquidation because it is insolvent. The process is driven by the directors, unlike the compulsory liquidation, which is normally driven by a creditor. An independent IP is appointed to act as liquidator by the directors and shareholders and creditors are invited to a meeting to either agree the appointment or nominate an alternate liquidator.
Debenture
The written terms of a loan extended to a company which is secured against the company assets.
Discharge
This is the process whereby a bankrupt is released from the restrictions of bankruptcy and previously assigned debts.
Dividend
The sum distributed to each creditor from an insolvency procedure in settlement of their debts. A dividend is normally expressed as a percentage of the debt or ""x"" pence in the £.
Factor
The sum distributed to each creditor from an insolvency procedure in settlement of their debts. A dividend is normally expressed as a percentage of the debt or ""x"" pence in the £.
Fixed Charge
A debenture under which specific assets are charged to a creditor (often a bank) thus preventing the company from realising or dealing with the assets without the consent of the secured creditor.
Floating Charge
A debenture granted to a creditor over company assets which may change over time in the normal course of business ie. Stock, debtors and work in progress.
Going Concern
Going concern is a general accounting principle which applies to a business which is able to continue trading on a solvent basis for the foreseeable future.
Individual Voluntary Arrangement (IVA)
A contract entered into between an individual (know as the debtor) and his creditors whereby the debtor makes a proposal to pay a lesser sum to the creditors in full and final settlement of debts. The creditors formally approve or reject the proposal at a formal meeting. The arrangement normally lasts for between 3 and 5 years. The arrangement provides the debtor with protection from his creditors and binds all creditors given notice of the arrangement. The arrangement is approved if greater than 75% of creditors who participate in the meeting, vote in favor.
Insolvent
A company or individual is said to be insolvent if they are unable to pay their debts as and when they fall due, or they have liabilities in excess of their assets.
Interim Order
A short-term court order granted prior to a trial or a final court order, commonly used for a Voluntary Arrangement.
Invoice Discounter
A similar organization to a factor. However, because the borrower will typically have a stronger balance sheet, the invoice discounter will usually offer the company a confidential finance facility. In these circumstances, the company's customers are unaware of the discounters' involvement, even though there has been an assignment of the invoices to the invoice discounter.
Licensed Insolvency Practitioner
An advisor, regulated by a recognized professional body, who is authorized to act as an administrator, administrative receiver, liquidator or supervisor, of a company, or trustee in bankruptcy or supervisor of an individuals affairs.
Liquidation
Often referred to as ‘winding up' and it is the most common corporate insolvency procedure. A liquidator is appointed to realize the company's assets and distribute the proceeds in a prescribed order of priority. A liquidation signals the cessation of a company and its eventual removal from the companies register. It can occur following an administrative receivership or administration.
Meeting of Creditors
A formal meeting of creditors who are owed money by a company or individual. Meetings can be held for various purposes and are common in all types of insolvency procedures.
Member's Voluntary Liquidation
This a is solvent liquidation, in which a liquidator is appointed by the shareholders. The company's assets are sufficient to settle all liabilities within twelve months and the surplus funds are distributed to the shareholders (members).
Moratorium
A process introduced by the Enterprise Act 2002 that allows smaller companies to obtain protection from creditor actions in order to restructure their balance sheets via a CVA, without the necessity for an Administration Order.
Nominee
Refers to the person (an IP) who is nominated by the debtor to report back on the debtor's proposal for an IVA or CVA and is proposed as supervisor of that arrangement.
Official Receiver
An officer of the Insolvency Service responsible for handling bankruptcies and compulsory liquidations in the initial stages immediately after a winding up. This person is head of the regional offices which have responsibility for bankruptcies and compulsory liquidations.
Proof of debt
Document submitted in an insolvency to legally establish a creditor's claim.
Proxy
Authority given by a creditor or member to another person (proxy holder) to attend, participate and vote at a meeting on behalf of the creditor or member.
Qualifying Floating Chargeholder
A floating charge debenture which would entitle the secured creditor to appoint an administrator.
Realizing an asset
Selling or disposing of an asset to raise money.
Security
A charge or mortgage over assets taken to secure payment of a debt. If the debt is not repaid, the lender (a secured creditor) has the right to sell the charged assets.
Statement of Affairs
Document completed by a bankrupt or a company director, detailing the assets and liabilities of the bankrupt or the insolvent company.
Statutory Demand
A formal notice requiring payment of a debt if within 21 days, exceeding £750 default of which bankruptcy or liquidation proceedings may be commenced.
Trustee
The trustee in bankruptcy is either the official receiver or an insolvency practitioner who takes control of the assets of an individual.
Unsecured Creditor
A creditor who does not hold security (e.g. a mortgage) over a debt and one which is not given preferential status under the Insolvency Act 1986. In general most creditors other than employees are unsecured.
Winding up Order
An order made by a court for a company to be placed in compulsory liquidation.
Winding Up Petition
A petition presented to the court on behalf of a creditor, usually by a solicitor to grant a winding up order over a debtor of the creditor's company.
