This is here to help you with the terminology used in the world of insolvency.
Hopefully this will help you make the right decision for you.
Commonly used terms in insolvency:
Please see Our Administration page for further information.
A person who controls a company which has gone into administration. An administrator must be a licensed insolvency practitioner.
Administrative Receiver/ Administrative Receivership
An administrative receiver may be appointed by a lender (usually a bank) with a pre-Enterprise Act floating charge over the company’s assets. The administrative receiver primarily acts on behalf of the appointor to recover their debt.
An Annual General Meeting (AGM) is where company directors share information with the shareholders about the past year’s performance and often provide forecasts and plans for the future. Shareholders of that company are allowed to discuss their opinions and can vote for any eligible changes which can be made such as auditors and directors.
The act of voiding or invalidating a decision that has been taken. A bankruptcy may be annulled if it can be demonstrated that the individual should not have been made bankrupt.
This is a term used when a debt has not been paid on time and the payment has become overdue. If the debt is not paid then action may be taken to reclaim the money.
Anything that is owned by the individual or company which has a value either now or will have a value at some time in the future. Examples include vehicles, shares, money in the bank or in hand, property and book debts. Less obvious assets may be intangible, such as goodwill, patents, “brands” or equitable contracts.
A bailiff is someone who works on behalf of the court to collect debt. There are several types of bailiffs whose powers vary and as a result they act differently. Bailiffs can be instructed to seize goods for payment of debts if an individual or company fails to pay a debt. (such as through a County Court Judgement or CCJ): they can also be used to repossess property.
Consequences of bankruptcy include losing control of assets, restrictions upon the ability to obtain credit and not being allowed to act as a company director. Some occupations specifically indicate that becoming bankrupt constitutes a breach of employment terms so we recommend that you read your employment contract. Bankruptcy will also significantly and negatively impact your credit rating.
A court order making an individual bankrupt.
A creditor may only petition (creditor’s petition) for an individual to be made bankrupt if the debt is unsecured and for a quantifiable sum that is in excess of £750. Bankruptcy can also be petitioned for by a group of creditors if the combined sum due to them is more than £750. A debtor can also petition for their own bankruptcy (debtor’s petition) if they are aware that they are unable to pay their debts. The proceedings will normally take place a local court with a bankruptcy jurisdiction. For more information see http://www.insolvency.gov.uk
Bankruptcy restrictions order or undertaking
A bankruptcy restriction order or undertaking is where a restriction is made against an individual. This could result in bankruptcy restrictions continuing for a period of between two and fifteen years.
BEIS – The Department for Business, Energy and Industrial Strategy (formerly DTI – Department of trade and industry)
Is the government department responsible for trade and industry. The Insolvency Service forms part of BEIS.
These are monies that are owed to an individual or company for goods supplied or services provided. They are “assets” – see above. Individuals or companies who owe the money are referred to as debtors.
County Court Judgement (CCJ)
A County Court Judgement is a court action where an individual or company has been taken to court for non-payment of debts. The court may order the debt to be paid within a period of time. If the debt remains unpaid further action can be taken to recover it – eg use of a bailiff.
All UK limited companies and PLC’s (public limited companies) are registered at Companies House. All of the company information filed with regard to these companies is stored and is available to the public.
This is an order made by the court granting a charge over an interest in a property in respect of an unpaid debt. The charge is similar to a mortgage charge in that the debtor may not dispose of the property without either satisfying the charge or obtaining the charge holder’s permission.
This is an assessment of credit worthiness used by banks and other lenders, expressed as a score. It can relate to either individuals or companies and is based on a combination of factors but mainly past credit history. An application for a loan or credit may stand or fall depending on the credit rating. Whilst taking credit and paying promptly will have a positive impact on a credit rating, the existence of CCJ’s or any defaults on paying debts will have a negative impact.
Individuals or companies who are owed money. It can also be someone who will (or may) be owed money in the future due to an obligation that has already been entered into, but not yet crystallised.
Company Voluntary Arrangement (CVA )
Please see Our CVA page.
Creditors Voluntary Liquidation (CVL)
Please see Our CVL page.
These are individuals or companies that owe money to a third party for goods or services provided.
Debt relief order
An alternative (and similar in many ways) to bankruptcy but where the amount of debt is lower. They are suitable for people who do not own their own home, have little surplus income and assets and less than £20,000 of debt. – for more information see http://www.insolvency.gov.uk
These are monies that are owed to an individual or company for goods supplied or services provided.
Company directors are ultimately responsible for the conduct of the company. This includes the day to day running, management, control and compliance of the company.
Three months following the striking of a company from the Registrar of Companies, that company will be formally dissolved at Companies House, ceasing to exist.
The seizure of an individual’s or a company’s property in order to obtain payment of money owed. This is often implemented by landlords to recover unpaid rent.
A way of raising finance using book debts as security. A company issues an invoice for goods or services provided. The factoring company will advance to the company a pre-agreed percentage of the value of the invoice. The company receives the remaining balance of the invoice (less the factoring charge) when the customer settles the invoice.
Fixed and floating charge
This is security over company assets. The legal document usually used to create such charges is a debenture.
- A fixed charge generally attaches to fixed assets such as property, plant and equipment. They are specifically mentioned in the document of charge and the company cannot sell these assets without the permission of the lender.
- A floating charge is usually attached to a category of assets. The borrower does not require permission to sell these assets and the charge relates to all assets caught within the charged category. A floating charge is often associated with current assets including stock and work in progress. The company can deal with these assets in the normal course of business, whenever necessary, without any reference to the charge holder.
- A floating charge attaches only when it “crystallises”. This occurs, for example, if a bank calls in its lending and demands full repayment. Once the charge crystallises the company would be unable to make use of the assets without the permission of the charge holder.
Where trade continues without any means of repaying debts and with the intention of defrauding creditors.
Where a business continues to operate and make a profit.
HMRC – Her Majesty’s Revenue & Customs
The government department that regulates and collects customs and duties for example VAT and Income Tax. These functions were historically dealt with by separate departments – HM Customs & Excise and the Inland Revenue.
Income payments agreement
Within bankruptcy, this refers is an agreement entered into between the bankrupt and their trustee in bankruptcy. The bankrupt agrees to pay the trustee a proportion of their income for an agreed time period.
An insolvency practitioner is an individual who is a specialist with expertise in insolvency matters and who is licensed to take formal insolvency appointments. The majority of insolvency practitioners in the UK are either accountants or solicitors.
This is when a company or individual cannot afford to repay their debts as and when they fall due.
A company or individual can also be considered insolvent if their liabilities exceed the value of their assets.
If an individual of a company is proposing a voluntary arrangement they may apply for an interim order in court. This protects them against any legal action being commenced or continued against them by creditors while the voluntary arrangement is proposed.
Individual Voluntary Arrangement (IVA)
Please see Our IVA page.
Joint and Several Liability
If one or more party enters into an agreement (such as a mortgage or rent agreement), then joint and several liability exists if all those parties named on the agreement are liable in full for the debt due. An example of this would be a joint mortgage where the mortgage company can pursue either or both people named on the mortgage for the full amount outstanding.
A form of security (for example a mortgage) to protect the lenders repayment of debt.
Debts and obligations of the company or individual. Examples include bank loans, mortgages, credit and store cards.
A limited company is a legal entity that is separate and distinct in law from its shareholders and directors.
The shareholders of a limited company are legally responsible for its debts only to the extent of the amount of capital they have invested.
Is the appointed individual responsible for dealing with the winding up of a company. The liquidator of a company must be a licensed insolvency practitioner.
A fund accumulated by contributions invested, to secure the payment to members of pension plans in retirement.
This is a written guarantee by an individual or entity to repay the debt of a third party in the event that that party is unable to meet that liability.
Public limited company (PLC)
A PLC is a company that may offer its shares for sale to the public on a stock exchange.
A creditor who, in the event of an insolvency event, would be entitled to receive a dividend payment in priority to non-preferential unsecured creditors. This includes employees for certain amounts.
Where applicable, an individual need not attend a meeting. They can appoint a third party to attend and vote in their place – a proxy.
Employees may be made redundant when their employment position no longer exists. Redundancy occurs in insolvencies as businesses cease to trade or are materially restructured.
Individuals or entities that have invested capital into a company in exchange for a share of ownership.
Statement of affairs
This is a statement of the assets and liabilities of a company or individual as at the date of the commencement of the insolvency process that the entity is subject to. The statement of affairs should provide creditors with an understanding as to extent of that company or individual’s overall deficit.
Unincorporated business owners who trade without a business partner.
When an individual or company enters a voluntary arrangement a supervisor of that arrangement is appointed. The supervisor ensures that the agreed terms of the arrangement are complied with. Failure to adhere to the terms of the arrangement could result in the supervisor failing the voluntary arrangement resulting in liquidation or bankruptcy.
Trustee in bankruptcy
A trustee in bankruptcy is either the Official Receiver or a licensed insolvency practitioner. The trustee has the duty to manage the affairs of the bankrupt’s estate.
A creditor who does not possess registered security against an asset (a mortgage provider is a secured creditor). Some unsecured creditors may also be preferential creditors, for example former employees for unpaid wages.
VAT – Value Added Tax
Is a duty levied on the receipt of certain goods and services. Business owners will usually have to register for VAT if their taxable turnover exceeds the current VAT threshold set by the Government.
WUP – Winding up petition
A petition filed in the court for the compulsory winding up of a company due to an unpaid debt.