Glossary
Some terms you come across in insolvency proceedings can be confusing. To help you, here’s a brief glossary. This is for general guidance only. Many of the terms have a specific technical meaning in certain contexts that may not be covered here.
Administration Order (Personal)
An order made in a county court to arrange and administer the payment of debts by an individual.
Administration Order (Corporate)
An order made by a court when a company appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself, file the notice at court.
Administrative Receiver
An Insolvency Practitioner (IP) appointed by a debenture holder (lender) secured by a floating charge that covers the company's assets. The IP's task is to realise those assets on behalf of the debenture holder.
Administrative Receivership
The process where an IP is appointed by a debenture holder (lender) to realise a company's assets and pay preferential creditors and the debenture holder's debt. The right of a debenture holder to appoint an administrative receiver has been restricted by the Enterprise Act 2002.
Administrator
An IP appointed by the court under an administration order or by a floating charge holder or by the company or its directors filing the notice at court.
Annulment
Cancellation.
Assets
Anything that belongs to the debtor/company that can be used to pay their debts.
Bankruptcy Restrictions Order or Undertaking
A procedure was introduced on 1 April 2004 whereby a bankrupt who has been dishonest or in some other way to blame for their bankruptcy may have a court order made against them or give an undertaking to the Secretary of State that will mean bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years.
Charge
Security taken over property by a creditor to protect them against non-payment of a debt. (eg, a mortgage).
Company Directors’ Disqualification Act 1986
An Act of Parliament about the disqualification of directors.
Compulsory Liquidation
Winding up of a company after a petition to the court, usually by a creditor.
Contributory
Every person liable to contribute to the assets of a company if it is wound up. In most cases, this means shareholders who have not paid for their shares in full.
Creditor
Someone owed money by a bankrupt or company.
Debenture
A document in writing, usually under seal, issued as evidence of a debt or the granting of 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 companies' assets.
Debtor
Someone who owes money to another / others
Director
A person who conducts the affairs of a company.
Disqualification
A procedure whereby a person has a court order made against them or gives an undertaking to the Secretary of State making it an offence for that person to be involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).
Dividend
Any sum distributed to unsecured creditors during an insolvency process.
Fixed Charge
A charge held over specific assets. The debtor/company cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.
Floating Charge
A charge held over general assets of a company. The assets may change (such as stock) and the company can use the assets without the consent of the secured creditor until the charge ‘crystallises’ (becomes fixed). Crystallisation occurs on the appointment of an administrative receiver, on the presentation of a winding-up petition or as otherwise provided for in the document creating the charge.
Guarantee
An agreement to pay a debt owed by a third party. It must be evidenced in writing for it to be enforceable.
Insolvency Practitioner (IP)
An authorised person who specialises in insolvency, often also an accountant or solicitor. They are authorised either by the Secretary of State or by one of a number of recognised professional bodies, including the Insolvency Practitioners’ Association (the IPA).
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 three types of liquidation - compulsory, creditors' voluntary and members' voluntary.
Liquidator
The Official Receiver or an IP appointed to administer 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.
Nominee
An IP who carries out the preparatory work for a voluntary arrangement, before its implementation.
Officer (of a Company)
A director, manager or secretary of a company.
Official Receiver (OR)
An officer of the court and civil servant employed by The Insolvency Service, who deals with bankruptcies and compulsory company liquidations.
Petition
A formal application made to a court.
Preferential Creditor
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 (and other forms of insolvency) to state how much is claimed. The form is supplied by the Liquidator (or IP).
Provisional Liquidator
OR or IP appointed to preserve a company's assets pending the hearing of a winding-up petition.
Proxy
Instead of attending a meeting, a person can appoint someone to go and vote in their place - a 'proxy'.
Proxy Form
Form that must be completed if a creditor wishes someone else to represent them at a creditors' meeting and vote on their behalf.
Public Examination
When a company is being wound up, or in bankruptcy proceedings, the Official Receiver may at any time apply to the court to question the company's director(s) or any other person who has taken part in the promotion, formation or management of the company or the bankrupt.
Realise
Realising an asset means selling it or disposing of it to raise money, for example to sell an insolvent's assets and obtain the proceeds.
Receiver
The commonly used name for an administrative receiver. The term can also mean a person appointed by the court or with the power to receive the rents and profits of property. Receivers who are not administrative receivers do not need to be licensed IPs.
Receivership
A company in administrative receivership is often said to be ‘in receivership’.
Rescission
A procedure that cancels a winding-up order.
Release
The process by which the Official Receiver or an IP is discharged from the liabilities of office as trustee/liquidator or administrator etc.
Secretary of State
The Secretary of State for the Department of Trade and Industry.
Secured Creditor
A creditor who holds security, such as a mortgage, over a person's/company’s assets for money owed.
Shadow Director
A person who, without being formally appointed, gives instructions on which the directors of a 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.
Supervisor
An IP appointed to supervise the carrying out of a voluntary arrangement.
UNCITRAL
United Nations Commission on International Trade Law.
Unsecured Creditor
A creditor who does not hold security (such as a mortgage) for money owed. Some unsecured creditors may also be preferential creditors.
Voluntary Liquidation
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
Order of a court, usually based on a creditor's petition, for the compulsory winding up or liquidation of a company or partnership.