A

Account rehabilitation

The process of rehabilitating the debtor with the aim of achieving up-to-date accounts/payments.

Administration Order

1. 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 a petition by the company, its directors or a creditor. The purpose of the order is to preserve the company’s business, allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action by its creditors.
2. The administration of the insolvent estate of a deceased debtor.
3. County Court process permitting an individual with modest debts to pay off by instalments. No licensed insolvency practitioner is involved.

Administrative Receiver

A licensed insolvency practitioner 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. Sometimes abbreviated to receiver.

Administrative Receivership

The term applied when a person is appointed as an administrative receiver. Commonly abbreviated to receivership.

Administrator

A licensed insolvency practitioner appointed by the Court under an administration order to achieve the purposes set out in the order. The administrator will need to produce a plan, known as his proposals for approval by the creditors to achieve this.

Agricultural Receivership

A specialist remedy available to a secured creditor to take control of the assets of a farmer under the Agricultural Credits Act 1928.

Arrears recovery

Recovery of individual or company arrears on payments which are due/in arrears.

Associates

Associates of individuals include family members, relatives, partners and their relatives, employees, employers, trustees in certain trust relationships. And companies which the individual controls. Associates of companies include other companies under common control (see also connected person).

B

Bankrupt

A bankrupt is an individual against whom a bankruptcy order has been made by the Court. The order signifies that the individual is unable to pay his/her debts and deprives him/her of his/her property, which is then realised for distribution amongst his creditors.

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Bond

Insurance cover to protect the unchanged assets of an estate, needed by a person who acts as a licensed insolvency practitioner.

Break-up-Sale

Dismantling of a business. Trading ceases and the assets are sold off piecemeal.

Business restructuring and turnaround

Restructuring is the corporate management term for the act of partially dismantling or otherwise reorganising a company for the purpose of making it more profitable. Also known as corporate restructuring, debt restructuring and financial restructuring.

C

Charge

A right given to the creditor to have a designated asset of the debtor appropriated to the discharge of the indebtedness, but not involving any transfer either of possession or ownership.

Charging Order

Court Order placing restrictions on the disposal of certain assets, such as property or securities, given after judgment and gives priority of payment over other creditors.

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Tribunals Courts and Enforcement Act 2007

Company Directors Disqualification Act (1986)

Consolidation Act on the disqualification of persons from being directors or otherwise concerned with a company’s affairs.

Company reconstructions

Typically refer to the transfer of a company's (or several companies') business to a new company. The purposes can vary, from changing the objects of the business, varying share class rights, or reorganising before a demerger takes place.

Company Voluntary Arrangement (CVA)

A voluntary arrangement for a company is a procedure whereby a plan or reorganisation or composition in satisfaction of its debts is put forward to creditors and shareholders. There is limited involvement by the Court and the scheme is under the control of a supervisor.

For further information see insolvency page

Composition

An agreement between a debtor and his creditors whereby the compounding creditors agree with the debtor and between themselves to accept from the debtor payment of less than the amounts due to them in full satisfaction of their claim.

Compulsory Liquidation

A compulsory liquidation of a company is a liquidation ordered by the Court. This is usually as a result of a petition presented to the Court by a creditor and is the only method by which a creditor can bring about a liquidation of its debtor company.

Connected Persons

Directors or shadow directors and their associates and associates of a company.

Cork Report

Report of the Insolvency Law Review Committee, chaired by Sir Kenneth Cork, upon which the Insolvency Act 1986 is substantially based (Command Paper 8555,1982).

Court-appointed Receiver

A person, not necessarily a licensed insolvency practitioner, appointed to take charge of assets usually where they are subject to some legal dispute. Not strictly an insolvency process, the procedure may be used other than for a Limited company, eg. To settle a partnership dispute.

Creditors’ Committee

A creditors’ committee is formed to represent the interest of all creditors in supervising the activities of an administrator or trustee in bankruptcy, or receiving reports from an administrative receiver (of Liquidation Committee).

Creditors’ Voluntary Liquidation (CVL)

Relates to an insolvent company. It is commenced by resolution of the shareholders, but is under the effective control of creditors, who can choose the liquidator.

D

DDA Claims – Disability Discrimination Act claims

An Act to make it unlawful to discriminate against disabled persons in connection with employment.

Debenture

Broadly speaking, a document which either acknowledges or creates a debt. The expression is commonly used to denote a document conferring a fixed and floating charge over all the assets and undertakings of a company.

Debt Recovery

Debt recovery, is the process of claiming monies owed from a debtor to be paid to the creditor, both of which can be an individual, company or organisation.  There are different approaches and methods to debt recovery, in order to recover debts at different stages of their severity including pre and post court proceedings and locating ‘gone aways’. 

Visit our Services section to find out about our comprehensive debt recovery services.

Debt Restructurings

When a company is having trouble making payments on its debt, it will often consolidate and adjust the terms of the debt in a debt restructuring. After a debt restructuring, the payments on debt are more manageable for the company and the likelihood of payment increases

Deed of Arrangement

A method for an individual (not a company) to come to terms with creditors outside formal bankruptcy. The procedure is governed by the Deeds of Arrangement Act 1914 and is now almost completely replaced by voluntary arrangements.

Defended possession work

The process whereby a tenant files a defence against the landlord on a possession order, for reasons such as failure to keep the property in good repair, rent arrears figure is incorrect and so on.

Deposit Protection Board

Constituted under the Banking Act 1987 to administer the Deposit Protection Fund. If an authorised institution becomes subject to liquidation or administration proceedings, the Board will pay those designated as ‘protected depositors’ compensation to the extent of 75% of the first £20000 of their total deposits.

Directors duties and liabilities

Directors owe strict duties of good faith, as well as duties of care and skill, to safeguard the interests of the company and the members.

Disqualification of Directors

A director found to have conducted the affairs of an insolvent company in an ‘unfit’ manner will be disqualified , on application to the Court by the DTI, from holding any management position in a company for between 2 and 15 years.

E

Endowment Claims

Relating to misselling of endowment policy.

Enforcement

The process used to evict a tenant if they fail to vacate the property after a possession order has been made against them.

Extortionate Credit Transactions

An extortionate credit transaction is a transaction by which credit is provided on terms that are exorbitant or grossly unfair compared with the risk accepted by the creditor. Such a transaction may be challenged by an administrator, a liquidator or a trustee in bankruptcy.

F

Fixed Charge

A fixed charge is a form of security granted over specific assets, preventing the debtor dealing with those assets without the consent of the secured creditor. It gives the secured creditor a first claim on the proceeds of sale, and the creditor can usually appoint a receiver to realise the assets in the event of default.

Floating Charge

A floating charge is a form of security granted to a creditor over general assets of a company which may change from time to time in the normal course of business (e.g. stock). The company can continue to use the assets in its business until an event of default occurs and the charge crystallises. If this happens, the secured creditor can realise the assets to recover his debt usually by appointing an administrative receiver, and obtain the net proceeds of sale subject to the prior claims of the preferential creditors.

Fraudulent Trading

Where a company has carried on business with intent to defraud creditors, or for any fraudulent purpose. It is a criminal offence and those involved can be made personally liable for the company’s liabilities.

Freezing Order

Court Order preventing the disposal of assets (formally know as a Mareva Injunction). Going Concern Basis on which licensed insolvency practitioners prefer to sell a business. Effectively it means the business continues, jobs are saved, and a higher price is obtained.

G

Guarantee

A legal commitment to repay a debt if the original borrower fails to do so. Directors may give guarantees to banks in return for the bank giving finance to their companies.

I

Individual Voluntary Arrangement (IVA)

A voluntary arrangement for an individual is a procedure whereby a scheme of arrangement of his affairs or composition in satisfaction of his debts is put forward to creditors. Such a scheme requires the approval of the Court and is under the control of a supervisor.

Insolvency

Defined as having insufficient assets to meet all debts, or being unable to pay debts as and when they are due. If a creditor can establish either test, he will be able to present a winding-up petition. For a bankruptcy petition, inability to pay is the only available ground. Insolvency Act 1986 Primary legislation governing insolvency law and practice. Nevertheless, many other statues and statutory instruments are also relevant.

For more information see insolvency page

Insolvency Practioner (IP)

See Licensed Insolvency Practitioner.

Insolvency Rules

The Insolvency Rules 1986, as amended, provide the detailed working procedures for the provisions of the Insolvency Act 1986.

Insolvency Services Account

An account maintained at the Bank of England by the Department of Trade & Industry, through which funds must be passed in liquidations and bankruptcies. Insolvent Liquidation A company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the liquidation.

Insolvent Partnerships Order 1994 (IPO)

An Order setting out the procedures for dealing with insolvent partnerships. The Order provides for winding up an insolvent partnership as an unregistered company, with or without concurrent insolvency proceedings against individual partners; for the joint bankruptcy of individual partners, without winding up the partnership as an unregistered company; and for the application of the administration and company voluntary arrangement procedures to insolvent partnerships.

Interim Order

An individual who intends to propose a voluntary arrangement to his creditors may apply to the Court for an interim order which, if granted, precludes bankruptcy and other legal proceeding whilst the order is in force.

Investors Compensation Scheme

A statutory scheme operated by the Securities and Investments Board to give individual investors up to £48000 protection if an authorised investment business collapses.

J

Judgment

1. Recognition of a debt by a Court.
2. Decision given by a Court at the conclusion of a trial.

L

Late payment legislation

In November 1998, the UK Government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. The UK was one of the first countries in the EU to introduce late payment legislation to help promote a culture of prompt payment.

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Law of Property Act 1925

Governs transactions in law and property. Contains statutory powers of receivers appointed under a fixed charge.

Licensed Insolvency Practitioner (IP)

Person licensed by one of the Chartered Accountancy bodies, the Law Societies, The Insolvency Practitioners Association or the Department of Trade. The only person who may act as an office holder in an insolvency. Persons claiming to be insolvency practitioners, but who do not hold a license may not be able to help you. The status of anyone claiming to be a licensed insolvency practitioner can be confirmed by calling the SPI or one of the other regulatory bodies.

Lien

Right to retain possession of assets or documents until the settlement of a debt.

Liquidation

Liquidation is the process whereby a company has its assets realised and distributed to satisfy, insofar as it is able, it’s liabilities and to repay its shareholders. The term winding up is also used. Liquidation is a terminal process and is followed by the dissolution of the company.

Liquidation Committee

Committee of creditors who receive information from the liquidator and sanction some of his (c.f. Creditors’ Committee).

Liquidator

Licensed Insolvency Practitioner appointed to wind-up a company.

LPA Receiver

Law of Property Act 1925 receiver, more commonly known as a LPA receiver, is a person (not necessarily an insolvency practitioner) appointed to take charge of a mortgaged property by a lender whose loan is in default, usually with a view to a sale or to collect rental income for the lender. Common in the case of the failure of a property developer, whose borrowings will largely be secured on specific properties.

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M

Members’ Voluntary Liquidation (MVL)

A solvent liquidation where the shareholders appoint the liquidator to realise assets and settle all the company’s debts, plus interest, in full within 12 months.

Misfeasance

Breach of duty in relation to the funds or property of a company by its directors or managers.

Mortgage

A transfer of an interest in land or other property by way of security, upon the express or implied condition that the asset shall be re-conveyed to the debtor when the sum secured has been paid.

N

Nominee

Licensed insolvency practitioner nominated in a proposal for an individual or corporate voluntary arrangement to act as supervisor of the arrangement.

O

Office Holder

A liquidator, provisional liquidator, administrator, administrative receiver, supervisor of a voluntary arrangement, or trustee in bankruptcy.

Official Receiver (OR)

Officer of the Court, civil servant, member of the Department of Trade Insolvency Service, deals with bankruptcies and compulsory liquidations.

Onerous Property

The term onerous property in the context of a liquidation or bankruptcy, applies to unprofitable contracts and to property that is unsaleable or not easily saleable or that might give rise to a continuing liability. Such property can be disclaimed by a liquidator or a trustee in bankruptcy.

P

Partnership Voluntary Arrangement (PVA)

The term used to describe the company voluntary arrangement procedure as applied to partnerships under the provisions of The Insolvent Partnerships Order 1994

Petition

A written application to the Court for relief or remedy.

Policyholders Protection Act 1975

An act which established the Policyholders Protection Board to provide compensation to the public in the event of the liquidation of an insurance company. The Board will make payment in full of liabilities under certain policies of compulsory insurance and 90 percent of liability to provide policyholders under other general and investment type policies. Compensation is restricted to individual policyholders or partnerships; corporate policyholders are not protected.

PPI – Payment Protection Insurance.

An insurance that may be taken out alongside a loan, mortgage, credit card or store card for example. Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan etc if you are unable to work.

Preference

A payment or other transaction made by an insolvent company or individual which places a creditor in a better position than they would have been otherwise. A liquidator, administrator or trustee in bankruptcy may recover sums which are found to be preferences. If the transaction took place with within a period of either two years (where the creditor is a connected person) or six months (in other cases) of the insolvency.

Preferential Creditor

Defined in Schedule 6 of The Insolvency Act 1986. Has priority when funds are distributed by a liquidator, administrative receiver or trustee in bankruptcy.

Proof of Debt

Document submitted by a creditor to the licensed insolvency practitioner giving evidence of the amount of the debt. Only used in compulsory liquidations.

Provisional Liquidator

The name usually given to a licensed insolvency practitioner appointed to safeguard a company’s assets after presentation of a winding-up petition but before a winding-up order is made.

Proxy

Document whereby a creditor authorises another person to represent him at a meeting of creditors. The proxy may be a general proxy, giving the proxyholder a discretion as to how he votes, or a special proxy requiring him to vote as directed by the creditor. A body corporate can only be represented by a proxy.

Proxyholder

Person who attends a meeting on behalf of someone else.

Q

Query Management

Strategy to identify and challenge "false" queries and to shorten resolution of genuine ones.

R

Receiver

Is often used to describe an administrative receiver, who may be appointed by a secured creditor holding a floating charge over a company’s assets. More accurately, a receiver is the person appointed by a secured creditor holding a fixed charge over specific assets of a company in order to take control of those assets for the benefit of the secured creditor.

Receivership

The general term applied when a person is appointed as a receiver or administrative receiver. A procedure whereby a creditor can enforce security against a company's assets in an effort to obtain repayment of the secured debt.

Recognised Professional Body (RPB)

An organisation approved by the President of the Board of Trade as being able to authorise its members to act as licensed insolvency practitioners.

Relevant Date

The commencement date of the insolvency proceedings.

Reservation of Title (or Retention of Title)

A provision under a contract for the supply of goods which purports to reserve ownership of the goods with the supplier until the goods have been paid for. Reservation of title is a complex and continually evolving area of law.

Retention of title claim issues

Legal rule that sold and delivered merchandise remains the property of the seller until the buyer pays the purchase price in full.

S

Scheme of Arrangement

A term normally used to describe a compromise or arrangement between a company and its creditors or members or any class of them under Section 425 of the Companies Act 1985, which may involve a scheme for the reconstruction of the company. If a majority in number representing three-fourths in value of the creditors or members or any class of them agree to the compromise or arrangement it is binding if sanctioned by the court. Section 425 may be invoked where there is an administration order in force in relation to the company, where there is a liquidator or provisional liquidator in office or where the company is not subject to any insolvency proceedings. The term is also used in section 1 of the Insolvency Act 1986 in relation to company voluntary arrangements.

Secured and Unsecured Recoveries Work

Secured recoveries relates to monies outstanding/loan secured against a debtors asset. Unsecured recoveries are based on monies outstanding/loan which are not secured against a debtor’s asset.

Secured Creditor

A creditor with specific rights over some or all of a debtor’s assets. A secured creditor gets paid first out of the proceeds of sale of the security.

Security

A charge with specific rights over some or all of a debtor’s assets. A secured creditor gets paid first out of the proceeds of sale of the security.

Shadow Director

A person who is not formally appointed as a director, but in accordance with whose directions or instructions the directors of a company are accustomed to act. However, a person is not a shadow director merely because the directors act on advice given by him in a professional capacity.

Special Manager

A special manager is a person appointed by the Court in a compulsory liquidation or bankruptcy to assist the liquidation, Official Receiver or trustee in managing the insolvent’s business. He does not need to be a licensed insolvency practitioner.

Statutory Demand

A formal notice requiring payment of a debt exceeding £750 within 21 days, in default of which bankruptcy or liquidation proceedings may be commenced without further notice. Cannot be used where the debt is disputed.

For further information visit insolvency page

Supervisor

The licensed insolvency practitioner appointed by creditors to supervise the way in which an approved voluntary arrangement is put into effect.

T

Third Party Disputes & Breach of Mandate Claims

Third party disputes are complaints which cannot be resolved directly between the consumer and retailer or manufacturer.

Transaction at an Undervalue

A transaction at an undervalue can describe either a gift or a transaction in which the consideration received is significantly less than that given. In certain circumstances such a transaction can be challenged by an administrator, a liquidator or a trustee in bankruptcy.

Trustee

Quite apart from its common usage (eg. Under the Trustee Act 1925) this is a term used for a variety of insolvency appointments, including the licensed insolvency practitioner appointed in an English bankruptcy; a Scottish sequestration; a deed of arrangement; a Scottish trust deed and an administration order (of the affairs of a deceased debtor).

U

Unsecured Creditor

Strictly, any creditor who does not hold security. More commonly used to refer to any ordinary creditor who has no preferential rights, although, in fact preferential creditors will almost always also be unsecured. In any event, the last in the queue, apart from shareholders.

V

VAT Bad Debt Relief

The relief obtained in respect of the VAT element of an unpaid debt. Previously available only when the debtor became insolvent, relief if now available where debt is 6 months old at the relevant date.

Voluntary Arrangements

See Individual Voluntary Arrangements (IVA) and Company Voluntary Arrangements (CVA).

Voluntary Liquidation

See creditors’ voluntary liquidation and members’ voluntary liquidation.

W

Winding-up

See liquidation.

Winding-up Order

Order made by the Court for a company to be placed in compulsory liquidation.

Winding-up Petition

A Winding-up Petition is presented to the Court to seek an order for a company to be put into compulsory liquidation.

A Winding-up Petition is a legal document that is submitted by the party or parties wishing to liquidate the company. Parties submitting a Winding-up Petition may be the directors of the company themselves, or may be a third party such as a creditor.

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Workouts

Out-of court company debt restructurings, are also known as workouts.

Wrongful Trading

Applied to companies in liquidation where a director allowed the company to continue trading in circumstances where he should have concluded that, there was no reasonable prospect that the company would avoid going into insolvency or liquidation. The directors involved may be made personally liable to make a contribution to the company’s assets.