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A procedure which places a company under the control of an insolvency practitioner and the protection of the court. Administration is intended to fulfil one of the following objectives; rescuing the company as a going concern,  achieving a better result for the creditors as a whole than would be likely if the company were wound up without first being in administration, or realising property in order to make a distribution to one or more secured or preferential creditors. While a company is in administration, creditors are prevented from taking any legal recovery action against it, except with the permission of the court. An administrator may be appointed either by an order of the court, on application by either the company, its directors, one or more creditors, or, if it is in liquidation, its liquidator. Without a court order an administrator may be appointed, by direct appointment by the company, its directors or a creditor holding a floating charge.

An order made in a county court to arrange and administer the payment of debts by an individual.

Administrative Receiver
An Insolvency Practitioner appointed by the holder of a floating charge, created before 15th September 2003, covering the whole, or substantially the whole, of a company’s property. An administrative receiver can carry on the company’s business and his task is to realise assets on behalf of the debenture holder.

Administrative Receivership
The term applied when an Insolvency Practitioner is appointed as an administrative receiver. The right of a debenture holder to appoint an administrative receiver has been restricted by the Enterprise Act 2002.

Anything of value that belongs to a debtor and that may be used to repay a debt.

Asset Based Lender
An financier who will advance funds to a company on the strength of the assets of its balance sheet, principally, debtors, stock, plant and machinery and property. A debenture is often required to secure their lending position.

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.

The act of an individual in declaring themselves to be insolvent. A debtor can make a court application themselves, or a creditor owed greater than £750 may petition the court for a bankruptcy order to be made. A trustee in bankruptcy will be appointed to deal with the bankrupt's assets and liabilities following the making of a bankruptcy order by the court.

Bankruptcy Petition
A petition made to a court to request that a bankruptcy order be made against an individual.

Bankruptcy Restrictions Order or Undertaking
A procedure introduced on 1 April 2004 penalising ‘bad’ bankrupts, whom the court believes have been dishonest or culpably for their own bankruptcy. An undertaking or court order may be made against a bankrupt  which will mean that bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years.

The insurance cover needed by a licensed insolvency practitioner when appointed to deal with the insolvency of an individual or company, which protects creditors in the event of fraud by the office holder.

Chattel Assets
Any moveable fixtures and fittings, such as machinery, office equipment and such like, that is owned by a company or individual.

Charging Order
A court order placing restrictions on the disposal of certain assets, such as property or securities, given after judgement which gives priority of payment over other creditors. 
Also an order directing that a charge be registered at the Land Registry on property owned by a debtor.

Company Directors Disqualification Act 1986
An Act of Parliament which is used to regulate persons wishing to act as directors of a limited liability company. Insolvency practitioners acting as liquidators or administrators are required to file a report with The Insolvency Service on the directors’ conduct. The Insolvency Service then decide if future restrictions should be placed on these directors, including shadow directors, prohibiting them from taking part in the promotion, formation or management of a limited company.

Company Voluntary Arrangement
Also know as a CVA, a voluntary agreement is a procedure whereby a plan of reorganisation or composition in satisfaction of debts is put forward to creditors and shareholders. There is limited involvement by the court and the scheme is under the control of a licensed insolvency practitioner.

Compulsory Liquidation
The winding up of a company after a petition to the court, usually by a creditor. Following the making of an order to wind up the company’s affairs, matters will initially be dealt with by the Official Receiver.

Connected Persons
Directors or shadow directors and their associates, and associates of the company.

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.

Court-Appointed Receiver
A person, not necessarily a licensed insolvency practitioner, appointed to take control of assets usually where they are subject to a legal dispute. Not strictly an insolvency process, the procedure may be used other than for a limited company, for example to settle a partnership dispute.

A person or organisation that has advanced credit to a company or an individual. There are different classes of creditor, such as secured, preferential and non-preferential depending upon their rights against certain assets and ranking for distribution.

Creditor's Committee 
A committee of between three and five persons formed to represent the interests of all creditors in supervising the activities of an insolvency practitioner.

Creditors Voluntary Liquidation
A method of winding up a company whereby shareholders, usually at the directors' request, pass a resolution to place a company into liquidation because it is insolvent.  The process is normally commenced by the directors, unlike a compulsory liquidation, which is normally commenced by a creditor.  An independent Insolvency Practitioner is appointed to act as liquidator.

A document in writing issued as evidence of a debt or the granting of security for a loan of a fixed sum at interest, or both. The document sets out the rights of the lender and the obligations of the borrower, including details of security and the events which may lead to default. The term is often used in relation to loans, usually from a bank, secured by fixed and floating charges  over company’s assets.

A person who conducts the affairs of a company, including de facto and shadow directors.

This is the process whereby a bankrupt is released from the restrictions of bankruptcy.

A procedure under the Company Directors Disqualification Act 1986 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 promotion, formation or management of a company for the period specified in the order.

The seizure and holding of property as security for payment of a debt or satisfaction of a claim. Landlords can levy distress for rent, Local Authorities for unpaid rates, HMRC for unpaid taxes and creditors for unsatisfied judgements with Court approval. Goods can be removed for auction. Rules apply, and HMRC have an implied right of peaceful entry into a home or business premises. The distress must take place between sunrise and sunset and not on a Sunday, bank or public holiday. Forcible entry is not allowed and HMRC will not seize goods belonging to third parties. Tools of trade and items to cover basic domestic needs are exempt. New regulations governing this complex area of law are expected in 2012.

The sum distributed to creditors from an insolvency process in settlement of their debts.  A dividend is normally expressed as a percentage of the debt based upon pence in the £.

Extortionate Credit Transaction
A transaction where 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.

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. The secured creditor has 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 charge held over general assets of a company. The assets may change in the course of trade and the company can use the assets without the consent of the secured creditor until a crystallising event, when the charge then becomes fixed. Events crystallising the charge are set out in the documentation creating the charge, and typically include insolvency events such as the appointment of an administrative receiver, an administrator or the presentation of a winding-up petition.

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 debts.

The Gazette or London Gazette is the official daily newspaper of record which contains various statutory notices and advertisements in respect of companies registered in England and Wales.

Going Concern
A general accepted accounting principle which applies to a business which is able to continue trading on a solvent basis for the foreseeable future.

An agreement to pay a debt owed by a third party. It must be evidenced in writing for it to be enforceable.

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 providing finance to their companies.

Individual Voluntary Arrangement
A contract entered into between an insolvent debtor and his creditors whereby the debtor makes a proposal to pay a lesser sum to creditors in full and final settlement of his debts.  Creditors can formally approve, request modification or reject the proposal. To be approved, a majority of 75% is required based upon the value of each creditor’s debt for those creditors voting. 

The state of not being able to pay one's debts as and when they fall due or having liabilities in excess of assets.

Insolvency Act 1986
Primary legislation governing insolvency law and practice. Nevertheless, many other statues and statutory instruments are also relevant.

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

Interim Order
A short-term court order which provides the debtor with a moratorium, commonly used in connection with Voluntary Arrangement. If granted, the order prevents any further legal proceedings being continued during the period of the order.

Invoice Discounter
A financier of sales debts, similar to a factor. Where the borrower typically has a stronger balance sheet, the invoice discounter will usually offer the company a confidential finance facility.  In such circumstances, the company's customers are unaware of the discounters' involvement, even though there has been an assignment of the invoices to the invoice discounter.

Law of Property Act 1925 
Legislation with governs transactions regarding property. It contains powers to appoint receivers under a fixed charge. The LPA Receiver, who is not necessarily an insolvency practitioner, can be appointed to take charge of a mortgaged property by a lender whose loan is in default, usually with a view to sale or to collect rental income for the lender.

Licensed Insolvency Practitioner
Person authorised by one of the chartered accountancy bodies, the Law Societies, The Insolvency Practitioners Association or the Department of Business. Such a person my act as an administrator, administrative receiver, liquidator, nominee or supervisor of a voluntary arrangement, or trustee in bankruptcy.

A right to retain possession of assets or documents until settlement of a debt.

The procedure whereby the assets of a company, or a partnership, are gathered in and realised, the liabilities met and surplus, if any, distributed to members. Also referred to as a winding up. See also compulsory, creditor’s voluntary and member’s voluntary liquidation.

Meeting of Creditors
A formal meeting of creditors who are owed money by a company or individual.  Meetings can be held for various purposes and are common in all types of insolvency procedures.

Members Voluntary Liquidation
A solvent liquidation where the shareholders appoint the liquidator to realise assets and settle all the company's debts in full within 12 months. Also called an MVL.

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

A process introduced by the Enterprise Act 2002 that allows smaller companies to obtain protection from creditor actions in order to restructure their business via a Company Voluntary Arrangement without the necessity for an Administration Order.

An Insolvency Practitioner who carries out the preparatory work for a voluntary arrangement, before its implementation. The Nominee provides an independent report to creditors on the feasibility of the proposal and convenes meetings where creditors can vote on the proposal.

Official Receiver
An officer of the Insolvency Service responsible for handling bankruptcies and compulsory liquidations in the initial stages immediately after a bankruptcy or winding up order has been made be a court.

Onerous Property
Used in relation to a liquidation or bankruptcy, the term applies to unprofitable contracts and to property that is unsaleable or that might give rise to a continuing liability. Such property can be disclaimed by a liquidator or a trustee in bankruptcy.

A payment or other transaction in the six month to two year period preceding a liquidation, administration or bankruptcy, which places a creditor or a person connected with the insolvent debtor, respectively, in a better position than they would have been otherwise. A liquidator, administrator or trustee in bankruptcy may recover any sums which are found to be preferences.

Preferential Creditor
A class of creditor who benefits from a statutory priority over a creditor with a floating charge and unsecured creditors. Preferential creditors are predominantly employees of the insolvent company or individual.

Proof of Debt
A document submitted in an insolvency to legally establish a creditor's claim.

A creditor whose claims is referred to as "proving" for his debt, and the document by which he seeks to establish his claim is his "proof".

Provisional liquidator
The person appointed by the court to deal with the affairs of the company prior to a compulsory winding up order. The liquidator has limited powers aimed at safeguarding assets.

A person who is authorised to attend a meeting on behalf of someone else.

Public examination
A power exercisable by the Official Receiver, in winding up and bankruptcy proceedings, enabling the OR to apply to court to question either persons connected with the company or the bankrupt.

Qualifying Floating Charge Holder
The holder of a debenture, securing a floating charge, which entitles the secured creditor to appoint an administrator.

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.

The person appointed by the court for some specific purpose or the person appointed by a mortgage to exercise his rights over the charges property under the Law of Property Act 1925. Not to be confused with the Official Receiver or Administrative Receiver.

The process by which the Official Receiver or an insolvency practitioner is discharged from the liabilities of office as trustee/liquidator or administrator.

Reservation of Title or Retention of Title
An agreement for the sale of goods, being an agreement (a) which does not constitute a charge on the goods, but (b) under which, if the seller is not paid and the company is wound up, the seller will have priority over all other creditors of the company in respect to the goods or any property representing the goods as title is retained until the goods are paid.

A charge or mortgage over assets taken to secure payment of a debt. If the debt is not paid, the lender has a right to sell the charged assets.

Secured creditor
A creditor with specific rights over some or all of the debtor's assets in the event of insolvency.

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. Note that exclusions exist for persons advising in a professional capacity.

Statement of Affairs
Document completed by a bankrupt or a company director, detailing the assets and liabilities of the bankrupt or the insolvent company.

Statutory Demand
A formal notice requiring payment of a debt over £750 within 21 days. If not paid bankruptcy or liquidation proceedings may be commenced.

The person appointed to supervise the implementation of the debtor's proposals for an IVA or CVA once approved by creditors.

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.

The trustee in bankruptcy is either the official receiver or an insolvency practitioner who takes control of the assets of a bankrupt.

Unsecured Creditor
A creditor who does not hold security (e.g. a mortgage) over a debt and one which is not given preferential status under the Insolvency Act 1986.  In general most creditors other than employees are non preferential or unsecured.

Walking Possession
A signed agreement by a debtor not to remove goods levied by a bailiff under the authority of a warrant of execution and to allow the bailiff access at any time to inspect the goods, in consideration of which the bailiff leaves the goods in the possession of the debtor.

Warrants of Execution
Method of enforcing a judgment for possession of a property whereby a bailiff is authorised to evict people and secure against re-entry.

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.

Winding up Petition
A winding-up petition is a petition presented to the court seeking an order that a company be put into compulsory liquidation.

Wrongful Trading

Applicable 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 solvent liquidation. The directors involved may be made personally liable to make a contribution to the company's assets.