Glossary of Terms
Riley Moss Insolvency wants you to understand the terminology used throughout the whole Corporate Recovery process. To make life simpler for you we have compiled an extensive Glossary of Terms:
A procedure by which an insolvency practitioner is placed in control of an insolvent company in order to achieve a specified purpose, namely, to preserve the company’s business, allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action of its creditors. An application to appoint an Administrator may be made by the company, it’s directors or a creditor holding a charge or security qualifying him or her to do so. An application is heard and an Administration Order is granted by the Court. Whilst an Administration is in force, creditors are prevented from taking any action against it without leave of the court.
An administration order is a Court Order placing a company that is, or is likely to become, insolvent under the control of an administrator following an application by the company, its directors or a creditor.
Appointed by the holder of a floating charge covering the whole, or substantially the whole, of a company’s property. He can carry on the company’s business and sell the business and other assets comprised in the charge to repay the secured and preferential creditors.
An Insolvency Practitioner appointed to take control of a company and accomplish the purpose of the Administration. The administrator will need to produce a plan, known as his proposals for approval by the creditors to achieve this.
Anything that belongs to the debtor that may be realised in order to pay his/her debt.
Bankruptcy is a process dealing with the estate of a bankrupt. A bankrupt is an individual against whom a bankruptcy order has been made by the Court, signifying that an individual is unable to pay his/her debts. Bankruptcy deprives a debtor of his/her property, which is realised for the benefit of creditors.
Bankruptcy restrictions order or undertaking
A procedure was introduced on 1 April 2004 whereby a Bankrupt who was being dishonest or in some way to blame for their bankruptcy may have a Court Order made against them or give an undertaking to the Secretary of State which will.
Security interest taken over property by a creditor to protect against non payment of debt (such as a mortgage).
Company Directors Disqualification Act 1986
An Act of Parliament that in certain circumstances may lead to the disqualification of Directors.
Winding up of a company after a petition to the Court, usually by a Creditor. This is the only method by which a creditor can bring about a liquidation of its debtor company.
Company Voluntary Arrangement (CVA)
A voluntary arrangement for a company is a procedure whereby a plan of reorganisation or composition in satisfaction of its debts, is put forward to creditors and shareholders. There is a limited involvement by the Court and the scheme is under the control of a supervisor.
Someone owed money.
A legal document in writing giving evidence of a debt or granting security for a loan of a fixed sum at interest (or both). The term is often used in relation to loans (usually from Banks) secured by charges, including floating charges, over company’s assets.
Person who conducts the affairs of a company.
The procedure whereby a person has a Court Order made against them or gives an undertaking to the Secretary of State which makes it an offence for that person to be involved in the management or directorship of that company for the period specified in the Order (unless leave has been granted by the Court).
Any sum distributed to unsecured creditors in an insolvency.
A charge held over specific assets. A debtor cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.
An agreement to pay the debt owed by a third party. There must be evidence in writing for it to be enforceable.
Liquidation (winding up)
Applies to companies or partnerships. It involves the realisation and distribution of the assets and usually the closing down of the business. There are 3 types of Liquidation: Compulsory, Creditors Voluntary and Members Voluntary.
The Official Receiver or an IP appointed to administrate the liquidation of a company or partnership.
Member (of a company)
A person who has agreed to be, and is registered as, a member, such as a shareholder, of a limited company.
An IP who carries out preparatory work for a voluntary arrangement prior to its implementation.
Officer (of a company)
A Director, Secretary or Manager of a company.
An Officer of the Court and Civil Servant employed by the Insolvency Service who deals with bankruptcies and compulsory company liquidations.
A formal application made to a Court.
A creditor who is entitled to receive certain payments in priority to floating charge holders and other unsecured creditors. These creditors include occupational pension schemes and employees.
Proof of Debt
A statutory form completed by a creditor in a compulsory Liquidation to state how much is claimed. The Liquidator supplies the form.
OR/IP appointed to preserve the company’s assets pending the hearing of a winding up petition.
Instead of attending a meeting, an individual can appoint someone to vote in their place – a proxy.
A form that must be completed if a creditor wishes someone else to represent him/her at a creditors meeting and vote on their behalf.
Realising an asset means selling or disposing it to raise money, for example, to sell an insolvent’s assets and obtain the proceeds.
Commonly used name for Administrative Receiver. The term can also mean a person appointed by the Court or with the power to receive the rent, profits or property. Receivers who are not Administrative Receivers do not need to be IP’s.
A company in Administrative Receivership is often said to “in Receivership”.
A process by which the OR or IP who is discharged from the liabilities of office as Trustee/Liquidator or Administrator.
Secretary of State
The Secretary of State for the Department of Trade and Industry.
A creditor who holds security such as a mortgage over a person’s assets or money owed.
A person who, without being formally appointed, gives instructions on which the directors of the company are accustomed to act.
Statement of Affairs
A document sworn under oath completed by a bankrupt, company officer or director(s) stating the assets and giving details of debts and creditors.
An IP appointed to supervise the carrying out of a company in a Voluntary Arrangement.
A creditor who does not hold security (such as a mortgage) or money owed. Some unsecured creditors may also be preferential creditors.
A method of Liquidation not involving the Courts or the Official Receiver. There are two types of Voluntary Liquidation: Members Voluntary Liquidation for Solvent Companies and Creditors Voluntary Liquidation for insolvent companies.
Winding up Order
An Order of a Court usually based upon a Creditors Petition for the compulsory winding up or Liquidation of a company or partnership.