Glossary of Insolvency Terms

Glossary of Insolvency Terms

administration order - this means either a county court order relating to an individual which makes provision for payment of that individual's debts or an order concerning a company which provides for the appointment of an administrator who will as a result take charge of the company's affairs

administrative receiver - an insolvency practitioner appointed pursuant to powers contained in a debenture which is secured by a floating charge that covers the whole or substantially the whole of the company's assets. The function of the administrative receiver is to realise the assets for the benefit of the debenture holder (usually a bank).

administrative receivership - the process pursuant to which an insolvency practitioner realises a company's assets and pays preferential creditors and the debt due to the debenture holder

administrator - an insolvency practitioner appointed by the court pursuant to an administration order

annulment - in the context of insolvency usually refers to the cancellation of a bankruptcy order

assets - anything belonging to the debtor which can be used to discharge or reduce debts

bankruptcy - formal insolvency proceedings relating to an individual

bankruptcy order - an order of the High Court or a county court resulting from a creditor's or debtor's petition pursuant to which an individual is declared bankrupt

bankruptcy petition - a document filed with the court by either the debtor him or herself or a creditor which requests (with reasons) that a bankruptcy order should be made. Creditor's petitions are often based on failure to comply with a statutory demand.

charge - security which is taken by a creditor over property or classes of property owned by a creditor to protect against non-payment of a debt (frequently by a mortgage or other fixed charge). The advantage of a charge is that it places the chargeholder ahead of other creditors in the event of the debtor's insolvency.

compulsory liquidation - the winding-up of a company after a winding-up order has been made by a court

contributory - anyone who is liable to contribute to the assets of a company in the event that it is wound up (generally shareholders who have not paid or paid in full for their shares)

creditor - an individual or a business which is owed money by another individual or business

debenture - a written document (normally in connection with a bank loan) which records a debt or the granting of security for a loan which is secured by a charge over the assets of a company

debtor - an individual or business which owes money to another individual or business
discharge - the process which frees a bankrupt from the restrictions of bankruptcy and releases him or her from most bankruptcy debts

disqualification - a procedure pursuant to which, by court order, it is made an offence for a person to be involved in the management or directorship of a company for a fixed period unless leave to do so is obtained from the court

dividend - a sum distributed to unsecured creditors in an insolvency. Distribution is made pro rata with reference to the value of admitted claims

estate - assets recovered or realised by a trustee for distribution to creditors

fixed charge - a charge held over specific assets (typically a mortgage in respect of property) which prevents a debtor from selling or otherwise dealing with the charged property without payment in settlement of the debt due to the chargeholder

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 happens 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.

income payments order - a court order which provides for part of a bankrupt's income to be paid to the trustee

insolvency - an excess of liabilities over assets or inability to pay debts as they fall due

insolvency practitioner - an insolvency professional who is either authorised by the Secretary of State for Trade and Industry or licensed by a recognised professional bodies. Various important insolvency functions are restricted by relevant legislation to licensed insolvency practitioners.

liquidation - the formal procedure for closing down a company or partnership including realisation and distribution of assets

liquidator - the Official Receiver or an insolvency practitioner who is appointed to attend to the liquidation of a company or partnership

Official Receiver - an officer of the court and civil servant who is employed by The Insolvency Service and deals with bankruptcies and compulsory company liquidations.

preferential creditor - a creditor who is entitled to receive certain payments in priority to other unsecured creditors. Such creditors include government departments, occupational pension schemes and employees.

proof of debt - a statutory form which is completed by a creditor to provide details of a debt being claimed in an insolvency including how much is owed and how and when the debt arose

provisional liquidator -an insolvency practitioner or the Official Receiver who is appointed by court order to preserve a company’s assets pending the hearing of a winding up petition

proxy - an authority from a creditor for someone to attend and vote on his behalf at a meeting

proxy form - a form authorising the attendance of a proxy on a creditor's behalf

public examination - the attendance at court of a company officer or a bankrupt to answer questions (requires a court order)

receiver - a person who is appointed by the court or pursuant to powers contained in a legal document with specific powers relating to the management of assets or funds belonging to a company or partnership. Also used to refer to administrative receivers.

receivership - generally refers to administrative receivership

secured creditor - a creditor who holds security, such as a mortgage, over a debtor's assets

shadow director - a person who, without formal appointment, gives instructions concerning the management of a company

statement of affairs - a document sworn under oath which is completed by a bankrupt or company officer and provides details of assets and liabilities

statutory demand - a formal document served on an individual or a business requiring payment in settlement of a debt by a specified time limit. Failure to comply with such a demand is often used as evidence of insolvency in support of a bankruptcy or winding-up petition

summary administration - a procedure which applies in bankruptcies based on a debtor's petition where the liabilities total less than £20,000. The Official Receiver usually acts as trustee and the bankrupt is normally discharged after two years.

supervisor - an insolvency practitioner who is appointed to supervise the implementation of an individual or company voluntary arrangement

trustee - the office holder with responsibility for supervising a bankruptcy, including the realisation and distribution of assets. The trustee is either the Official Receiver or an insolvency practitioner.
unsecured creditor - a creditor who does not have the benefit of security such as a mortgage or other charge

voluntary arrangement - an alternative to bankruptcy or liquidation which provides arrangements for repayment of all or part of the debtor's debts within a specified period. Such an arrangement requires the approval of a majority of the creditors.

voluntary liquidation - a procedure for securing the liquidation of a company without intervention from the court or the Official Receiver. Members' voluntary liquidation is used for solvent companies and creditors' voluntary liquidation for insolvent companies.

winding-up order - a court order for the compulsory winding up or liquidation of a company or partnership

winding-up petition - a document filed with the court by a creditor which requests (with reasons) that a winding-up order should be made against a company or partnership

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