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What do they
mean?
This is a brief explanation
of some of the terms you may come across in insolvency
proceedings. Please note that this glossary 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
An order made in a county court to arrange and
administer the payment of debts by an individual;
or an order made by a court in respect of a company
that 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 requisite
notice at court.
Administrative receiver
An IP appointed by the holder of a debenture that
is secured by a floating charge that covers the
whole or substantially the whole of 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 insolvency practitioner 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 requisite
notice at court.
Annulment
Cancellation.
Assets
Anything that belongs to the debtor that may be
used to pay his/her debts.
Bankruptcy restrictions
order or undertaking
A procedure will be 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 which will
mean that bankruptcy restrictions continue to
apply after discharge for a period of between
two to fifteen years.
Charge
Security interest taken over property by a creditor
to protect against non-payment of a debt (such
as 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.
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 which makes 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 in
an insolvency.
Fixed charge
A charge held over specific assets. The debtor
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.
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 Insolvency Practitioner
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
An officer of the court and civil servant employed
by The Insolvency Service, who deals with bankruptcies
and compulsory company liquidations.
Person
An individual or corporation.
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 to state how much is claimed.
The form is supplied by the Liquidator.
Provisional liquidator
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 him or her at a creditors'
meeting and vote on his or her 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 Insolvency Practitioners.
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 Insolvency Practitioner 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
Secured creditor
A creditor who holds security, such as a mortgage,
over a person'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 company 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 2 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.
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