Glossary of insolvency terms.

what do they mean?

This is a list of some of the more commonly used 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 by a court in respect of a company that appoints an administrator to take control of the company. A company can be put into administration by the directors, the company itself or by a floating charge holder. The required notices are then filed at court.

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 of for example Bankruptcy - usually by satisfying your debts in full or through an IVA.

Assets

Anything that belongs to the debtor or the company that may be used to pay his/her or its debts.

Bankruptcy

Bankruptcy is one way of dealing with debts you cannot pay. The bankruptcy proceedings deal with overwhelming debts. The bankrupt will be subject to some restrictions. Bankruptcy makes sure your assets are shared out fairly among your creditors. Anyone can go bankrupt, including individual members of a partnership.

Compulsory liquidation

Winding up of a company after a petition to the court, usually by a creditor.

Creditor

Someone owed money by an individual or company.

Creditors Voluntary Liquidation

It requires that the directors to call a meeting of the members and creditors. The directors instruct an IP to act as proposed Liquidator and usually the business closes down. The creditors vote to appoint a Liquidator.

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.

Dividend

Any sum distributed to unsecured creditors in an insolvency.

Insolvency Practitioner
An authorised person who specialises in insolvency, usually an accountant or solicitor. They are authorised either by the Secretary of State or by one of a number of recognised professional bodies.

Interim Order

Order made in court which protects an individual's assets from any legal proceedings either being started or continued , whilst the order is in force (which is usually 14 days).

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.

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 an insolvency procedure to state how much is claimed. The form is supplied by the Insolvency Practitioner.

Proposal (IVA or CVA)

A written document setting out the individual or company's position and offer to creditors. Once approved by creditors it becomes a legally binding document.

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.

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.

Release

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

Secured creditor

A creditor who holds security, such as a mortgage, over a person's assets for money owed.

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 operation of an individual or company voluntary arrangement.

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.