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G

H

I

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Accountant in Bankruptcy (AiB)

Administration (ADM)

Administration Order

Administrative Receiver

Administrative Receivership (AR)

Administrator                   

Agricultural Receivership

Annual General Meeting (AGM)

Annual Return

Annulment

Annulment Order

Antecedent Transactions (AT's)

Arrears

Asset Freezing Order

Assets

Associates

Bailiff – Certificated

Bailiff – County Court

Bankrupt

Bankruptcy (BKY)

Bankruptcy Order

Bond

Book Debt

BREXIT

Bankruptcy Restriction Order (BRO)

Bankruptcy Restriction Undertaking (BRU)

Charge

Charging Order

Chattel Mortgage

Collateral

Commissioner

Companies House

Companies’ Act 1985

Company Directors’ Disqualification Act 1986

Company Search

Company Voluntary Arrangement (CVA)

Company Voluntary Arrangement Moratorium

Compensation Orders

Composition

Compulsory Liquidation (CPL)

Confiscations

Connected Person

Contributory

County Court Judgement (CCJ)

Court-appointed Receiver

Credit Rating

Creditor

Creditor Petition

Creditor’s Committee

Creditors’ Voluntary Liquidation

(CVL)   

Crown Set-off

Debenture

Debt

Debt Arrangement Scheme (DAS)

Debt Management Plan (DMP)

Debt Relief Order (DRO)

Debtor

Debtors’ Petition

Decision Procedure

Declaration of Solvency

Deed of Arrangement

Deemed Consent

Default Notice

Department of Business and Innovation Skills (DBIS)

Directors’ Petition

Discharge

Disqualification of Directors

Dissolution

Distraint

Distress

Dividend

Employment Rights Act 1996 (‘ERA’)

Enterprise Act 2002

Execution

Extortionate Credit Transaction

Factoring

Fixed Charge

Fixed Charge Lender/Secured Creditor/Mortgagee

Floating Charge

Floating Charge Lender

Fraudulent Trading

Garnishee Order

Gazette (editions are published in London, Edinburgh, and Belfast)

Going Concern

Guarantee

Her Majesty’s Revenue & Customs (HMRC)

Hiatus Period

Income Payments Agreement (“IPA”)

Income Payments Order (“IPO”)

Individual Voluntary Arrangement (IVA)

Insolvency

Insolvency Act 1986 (IA1986)

Insolvency Practitioner (IP)

Insolvency Rules (IR1986)

Insolvency Services Account (ISA)

Insolvent

Interim Liquidator

Interim Order

Interim Receiver

Investigation of the failure of the business

Investors’ Compensation Scheme

Joint Liability

Judgement

Law of Property Act 1925 (LPA1925)

Legal Charge

Liabilities

Lien

Limited Company

Limited Liability

Liquidation

Liquidator

Misfeasance

Mortgage

Members Voluntary Liquidation (MVL)

National Insurance Contributions (NIC's)

Nominee

Office Holder

Official receiver (OR)

Official Receiver’s Rota

Onerous Property

Opting Out

Order of Priority

Pay As You Earn

Pension Fund

Personal Guarantee

Petition

Policyholders Protection Act 1975

Preference

Preferential Creditors

Pre-packaged Sale

Proof

Protected Trust Deed

Proving

Provisional Liquidator

Proxy

Proxy Form

Public Examination

Public Limited Company (PLC)

Partnership Voluntary Arrangement (PVA)

Qualifying Floating Charge (QFC)

Realise

Receiver

Receivership

Redundancy

Release

Rescission

Retention of Title (RoT)

Romalpa

Redundancy Payments Office (RPO)

Scheme of Arrangement

Secretary of State

Secured Creditor

Security

Sequestration

Set-off

Shadow Director

Shareholder

Sheriff’s Officer

Small Debts

Special Manager

Statement of Affair (SofA)

Statement of Claim

Statement of Insolvency Practice (SIP)

Statutory Demand

Subrogation

Supervisor

Time Records

Transaction at Undervalue (TAU)

Trustee

Turnover

UNCITRAL

Under Sheriff

Undischarged Bankrupt

Unsecured Creditor

Validation Order

Value Added Tax (VAT)

VAT Bad Debt Relief (BDR)

Voluntary Arrangements (VA's)

Walking Possession

Winding up

Winding up Petition (WUP)

Wrongful Trading

The Accountant in Bankruptcy (AiB) is an Executive Agency of the Scottish Government. It is responsible for: ·     

• administering the process of personal bankruptcy and recording corporate insolvencies in Scotland;   
• the determination of personal and entity bankruptcy applications;  *  making decisions on debt payment programme applications under the Debt Arrangement  Scheme;     
• protecting trust deeds;     
• maintaining public registers of all bankruptcies, trust deeds and statutory debt payment programme.

Administration is a process which places a company under the control of a licensed insolvency practitioner and the protection of the court. It can be commenced by the directors, floating charge holders or companies by filing a 'Notice of Intention to Appoint' or 'Notice of Appointment' at court, or in certain circumstances by making an application to the court.

The purpose of administration is to:

• save the company, or if that is not possible,
• to achieve a better result for creditors than in a liquidation.
• If neither of those is possible, the purpose of an administration is then to realise property to enable funds to be distributed to secured or preferential creditors.

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 an application by the company, its directors or a creditor. The purpose of the order is to preserve the company's business and assets to allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action by its creditors.

Administrative receiver refers to the appointment of a receiver over the whole of a company's assets by the holder of a floating charge to recover monies owed to the lender. The administrative receiver 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. Administrative receivership is increasingly rare, as it is only available where the security pre-dates 15 September 2003.

An Administrative Receivership is where a secured creditor (typically a bank) appoints an insolvency practitioner as the administrative receiver to take control of a company that cannot repay its secured debt. The receiver can choose to continue to run that company, or sell some or all of the assets in order to repay the secured creditor (and preferential creditors). Any funds or assets left over after this are returned to the company’s management. Often, this is followed by the liquidation of the company and the distribution of the remaining assets amongst unsecured creditors. In an effort to boost business rescue, the law was changed in 2003 to significantly curtail secured creditors’ ability to initiate administrative receivership proceedings. Administrative receiverships have become quite rare (with business rescue procedures like administrations being used instead).

An administrator is a licensed insolvency practitioner appointed to manage the affairs of a company to achieve the purpose of administration set out in the Insolvency Act 1986.

A special remedy to take control of the assets of a farmer under the Agricultural Credits Act 1928.

At the Annual General Meeting (AGM) the company’s directors report on the past years activity and make trading forecasts. The company’s shareholders are given the opportunity to voice their opinions. They can also vote on important matters such as the appointment of the auditors and company directors.

UK registered companies are legally required to submit an annual return to Companies House. This must contain certain information about the company, including details of key personnel, the registered office, and the company’s share capital.

Cancellation.

“What bankruptcy order?” An annulment order essentially cancels the original bankruptcy order, the effect of which is as if the bankruptcy order was never made.

Officeholders (i.e. liquidators or administrators in a corporate setting) can seek to challenge and unwind transactions entered into by a company over which they have been appointed, prior to its insolvency. These transactions are usually called antecedent transactions. There are a variety of antecedent transactions including:

Transactions at an undervalue, preferences (preferring one unsecured creditor over the unsecured creditors as a body), and

Dispositions of property made by the company after the commencement of the winding up process.

Arrears are debt repayments that have not been made on time. Once a debt has become overdue, legal action can be taken against you or your company to recover the money that is owed.

Order preventing the disposal of assets by a defendant pending the resolution of legal proceedings.

Assets are anything of value owned by the company. This can be tangible items such as property, vehicles, cash in hand or bank balances and shares. Assets also intangible such as Goodwill or intellectual property.

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.

A person authorised by the county court to act privately for landlords and certain public bodies in the seizure of goods for unpaid rent, rates and taxes.

An officer of the county court who acts in the execution of warrants and seizure of goods on judgment debts of the county court. See also: sheriff’s officer.

A bankrupt is an individual against whom a bankruptcy order has been made by the court and who has not been discharged from bankruptcy.

Bankruptcy is a procedure for an individual who is unable to pay their debts whereby a bankruptcy order is made by the court. The order shows that the individual is unable to pay his or her debts.

During a bankruptcy – which typically lasts for one year – creditors are not allowed to pursue a debtor (‘the bankrupt’) to reclaim money owed to them.

The Official Receiver, insolvency practitioner or Accountant in Bankruptcy (AiB) in Scotland is appointed to take charge of a bankrupt’s property and becomes known as the trustee. The trustee is allowed to sell the bankrupt’s property to raise money to repay creditors. This part of the process may take longer than the year-long protection offered by bankruptcy.

At the end of the year, the bankrupt’s remaining pre-bankruptcy debts are written off (except for student loans, child support payments, and fines and debts incurred through fraud) and the debtor starts afresh. Bankruptcy is often known as Sequestration in Scotland.

A bankruptcy order is a court order making an individual bankrupt. 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/her creditors.

A bond refers to the insurance cover needed by a licensed insolvency practitioner when appointed to deal with the insolvency of a company. The cost of the bond is payable from the estate.

Money owed to companies or individuals for goods or services that they have provided. Book debts are assets.

A term adopted in 2016 after David Cameron decided to have a referendum about Britain’s membership of the EU. It is an abbreviation of “British Exit” in the same way that the possible Greek Exit was referred to as GREXIT. The referendum on 23rd June will decide whether Britain will stay in or leave the EU

A Bankruptcy Restriction Order. Bankruptcy enforces a number of restrictions on a bankrupt for a set period of time while a bankruptcy restriction order imposes further restrictions for an extended period of time between 2 and 15 years. One to avoid! If you need advice give us a call.

A Bankruptcy Restriction Undertaking. A bankruptcy restriction undertaking has the same effect as a BRO of prolonging the restrictions of bankruptcy for between 2 and 15 years.

Where a BRU differs from a BRO is that an application is not made to the court. It is likely that the duration of the restrictions in force may be shorter as the allegations made have been accepted by the bankrupt.

A right over a particular property or type of asset given to a creditor by a debtor when borrowing money as protection for that creditor against the non-payment of that debt. For example, when a bank lends money to an individual to buy a house, they take a ‘charge’ (or ‘mortgage’) over the property the loan is used to buy – if mortgage repayments are missed, the bank can take control of the property to repay the debt. This is known as a Standard Security in Scotland.

A charging order is a 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.

A fixed charge granted over a moveable asset.

This is something that someone taking a loan agrees to give up should they fail to repay that loan e.g. their home or a business’ equipment.

A member of a creditors’ committee in a Scottish bankruptcy (known as sequestration).

Companies House are responsible for the records covering incorporation and dissolution of companies. Every UK Company is registered at Companies House, and the public is entitled to view the information held by them.

The Act that provides the framework of current company law.

This Act sets out the circumstances in which a person can be disqualified from acting as a company director.

A request to the registrar of companies to provide information from a company’s public file.

A CVA is a procedure where creditors agree to reduced or rescheduled debt repayments which allows the insolvent company to survive. The original directors are generally allowed to retain control of the company. The arrangement is overseen by an insolvency practitioner referred to as the supervisor.

A CVA moratorium protects companies from any legal action being taken against them by creditors. This allows the company’s director’s time to prepare a CVA proposal and hold a creditor’s meeting so that creditors can vote to accept or decline the rescue plan.

A moratorium will only be granted if the company can prove that it has a realistic expectation of being able to put a CVA or other rescue package in place. The moratorium is intended to provide breathing space so the company can implement the rescue plan. This process is rarely used.

The introduction of the Small Business, Enterprise and Employment Act 2015 brought with it amendments to the Company Directors Disqualification Act 1986. One of the most important changes was the introduction of a new power to enable the Secretary of State to apply for a compensation order to be made against a disqualified director where misconduct has caused identifiable loss to a creditor or creditors.             

Compensation orders pierce the corporate veil by extending beyond the normal restrictions and make the individual personally liable for any identifiable losses suffered by a creditor or creditors.

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

A compulsory liquidation of a company is a liquidation ordered by the court. This type of liquidation applies where a creditor has petitioned the court for the winding-up of the company.

Court orders for the confiscation of assets representing the proceeds of crime.

Someone closely related to the insolvent company, including directors, the directors’ family members and subsidiary or associated companies.

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.

When individuals or companies are taken to Court because they have not paid their debts, the resulting action taken by a Court could be a County Court Judgement (CCJ). The Court orders that the money owed is repaid within a specific timeframe. If the debt is not repaid within a set time frame the CCJ will be registered on a credit file that will make getting credit difficult. Further enforcement action, such as bailiff action can be taken by the debtor company if the debt is not repaid within a specified timeframe.

A court-appointed receiver is a person, who does not necessarily have to be a licensed insolvency practitioner, appointed to take charge of assets usually where they are subject to litigation and to preserve them pending the outcome of the case. This is not an insolvency process.

A credit rating is an evaluation of an individual or companies’ ability to fulfil future financial commitments and is based on their earlier financial dealings with other companies and Banks. A credit rating is a tool used by companies, banks and lending institutions that have been approached to supply credit or loans. A credit rating will affect how easy it is for an individual or a company to borrow money or obtain credit. It is calculated using a number of factors, including whether there are any CCJs or defaults on any of the debts.

People or businesses that are owed an amount of money now, or that will be owed an amount of money at some future point due to an agreement that is already in force.

An individual or group of individuals that together are owed in excess of £750 are entitled to petition to bankrupt an individual. Bankruptcy proceedings take place at a local county court with bankruptcy jurisdiction.

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

Creditors’ voluntary liquidation (or CVL) occurs where the shareholders, usually at the directors’ request, decide to put a company into liquidation because it is insolvent. In a CVL, the creditors can appoint a liquidator of their choice. The CVL is the most common way for directors and shareholders to deal voluntarily with their company’s insolvency.

The right of separate government departments to be treated as a single entity for the purpose of setting off amounts due to and from an insolvent company or individual.

A debenture, broadly speaking, is a document stating the terms of a loan, usually to a company. Debentures may be secured on part or all of a company's assets, or they may be unsecured. Where a company's principal secured creditor is a bank, a debenture in favour of the bank is likely to create fixed and floating charges over all of the company's assets.

Monies owed to an individual or company for goods or services provided.

A DAS is the Scottish government’s scheme which allows someone with financial difficulties to repay their debts through a debt payment programme. All interest and charges are frozen from the date of commencement of the DAS, but the debtor repays all of the sums due to their creditors over an extended period.

The DAS allows repayment of debts by individuals and businesses which are not companies to be repaid over a longer period of time, normally up to 10 years, but it could take longer than this. They are processed by the AiB as the DAS Administrator, but can be set up by insolvency practitioners, regulated Money Advice Advisors or regulated debt charities.

A DMP is an informal arrangement between creditors and a debtor. DMPs are not subject to the same legal or regulatory controls as formal insolvency procedures. They can last a number of years (sometimes decades) and are designed to ensure all debts are repaid. DMPs are usually handled by debt management companies or debt charities.

A DRO is available to individuals who have relatively low debts (under £20,000) and few or no assets (maximum of £1,000) i.e. those who are unlikely to be able to repay even a portion of their debt. The debtor is debt free (excluding student loans, child support payments and fines and debts incurred through fraud) after one year. DROs do not apply in Scotland. DROs are managed by the Official Receiver.

An individual or company who owes money.

An individual can issue his or her own petition, but only when they can declare to the court that they are unable to pay their debts.

The Decision Procedure is a process by which creditors can decide whether or not to consent to a particular proposal. These procedures currently apply in England and Wales only. A convener may seek a decision from creditors using one of the following procedures: (a) correspondence; (b) electronic voting; (c) virtual meeting; (d) physical meeting;(e) any other decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally, for example the deemed consent procedure. (e) any other decision making procedure which enables all creditors who are entitled to participate in the making of the decision to participate equally, for example the deemed consent procedure.

A director’s sworn statement of assets and liabilities required prior to a members’ voluntary liquidation to confirm that the company is solvent.

Method for an individual (not a company) to come to terms with creditors short of formal bankruptcy, it has now been almost completely replaced by Individual Voluntary Arrangements.

Deemed Consent is a procedure by which an office holder can seek a decision by creditors in the proceedings but which does not require creditors to vote on the proposal - the decision will be deemed to have been made if less than 10% of creditors in value object to the proposed decision. This procedure currently applies in England and Wales only.

Default notices are issued by creditors before they commence legal action. They give an individual or company seven days to pay the amount stated. If the amount is not paid, the creditor can take further legal action.

The DBIS (formally DTI) have the power to investigate offences that relate to business and company wrongdoing. Investigations are conducted against a company or people involved in the running of a company when the Insolvency Service or Companies House receive complaints. An interview under caution will usually form part of the investigation.

The DBIS has the power to escalate proceedings to the criminal court. In severe cases, a prison sentence and/or a financial penalty can be imposed. A director that has been convicted can be banned from being a director or being involved in the management of the company for 3- 15 years.

It is not only creditors who can petition for the winding up of a company, this can also be instigated by a company’s board of directors and not just because they consider that the company is unable to pay its debts.

A release of an individual subject to a bankruptcy or a debt relief order from certain types of their debts

The disqualification of a director usually refers to a director found to have conducted the affairs on an insolvent company in an 'unfit' manner. A director of a limited company can be disqualified if, during his term of office, a liquidator establishes sufficient evidence of 'unfit' conduct which leads to a prosecution by the Disqualification Unit of the Insolvency Service.

As a result of disqualification the individual is not allowed to hold any management position in a company for between 2 and 15 years and faces criminal sanctions and personal liability for the new company's debts if they contravene the disqualification order. A disqualification undertaking given to avoid the court action has the same legal effect.

A company is dissolved when it is removed from the register at Companies House. It ceases to exist as a legal entity and any property which it still owns at the date of dissolution goes to the Crown as bona vacantia. It is possible to apply to the court to have a dissolved company restored to the register.

Distraint is an action that can be referred to as “levying distress”. It is an action available to trade creditors, landlords, HMRC or local councils. Distraint gives creditors the right to have goods removed from a debtors business premises and sold at auction to the value of what is owed. The procedure that a creditor has to follow differs depending on the type of debt. For example, HMRC and landlords can distrain without a court order whereas a normal trade creditor would need to obtain a county court judgement in the first instance.

Same as distraint.

A distribution to creditors by an insolvency practitioner

This Act includes provisions for the Department of Trade and Industry to pay certain claims of employees in an insolvency.

An Act that revises the Insolvency Act 1986 in respect of the company administration procedure with effect from 15 September 2003 and personal bankruptcy with effect from 1 April 2004.

The seizure and sale of goods to satisfy a judgement debt.

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.

Some financial institutions provide a factoring service. They pay companies for their unpaid sales invoices in advance of the company receiving payment and the factoring company then collects the debts on the company’s behalf. The factoring company takes a percentage of each debt as a fee for their service.

A fixed charge is a form of security granted over specific assets, preventing the debtor from dealing with those assets without the consent of the secured creditor. Companies can create floating charges; individuals cannot.

These are creditors who have been granted rights (known as a ‘charge’, or ‘security’) to a specific property or asset belonging to the company or individual to whom money has been lent. If the loan is not paid back, the lender can take control of the asset the loan has been secured against and sell it. Banks are a typical fixed charge creditor – mortgages are an example of a loan secured by a fixed charge or standard security.

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).

These creditors are similar to fixed charge lenders, except their lending isn’t secured against a specific asset but to a general type, or ‘class’, of asset. For example, a company might grant a fixed charge to its bank for a loan used to buy the business’ warehouse, but might grant a floating charge over ‘all stock in the warehouse’ to another lender when it takes out an overdraft to buy stock and consumables. The floating charge lender has to accept that the exact goods (and their value) against which the loan is secured can vary over time.

Fraudulent trading refers to running a company with intent to defraud creditors. A liquidator can sue any person who is responsible for fraudulent trading and it is also a criminal offence.

Where A owes B, B owes C and C obtains a judgement against B, C may apply for a garnishee order for A to pay C direct, by-passing B.

An official government publication, which contains legal notices about new insolvencies and the details of appointed Office Holders. The Gazette also includes notices of any creditors’ meetings. You can see the Gazette website here.

Going concern is a statement based on an assumption that is made regarding the viability of an ongoing business. Financial statements are prepared assuming that a business entity will continue to operate in the foreseeable future without the need or intention on the part of management to liquidate the business. It is assumed that the business will realize its assets and settle its obligations in the normal course of the business.

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

The government department responsible for regulating and collecting customs duties and taxes such as VAT, National Insurance Contributions and Income Tax.

The interval between the directors‘ decision to prepare for creditors’ voluntary liquidation and the passing of the shareholders’ resolution formally placing the company into .

When you have been made bankrupt you will be asked to agree to make payments to your creditors if your disposable income is more than £20 per month. If an agreement can be reached with your trustee in bankruptcy this is known as an Income Payment Agreement.

In contrast to an IPA where the bankrupt agrees with the monthly amount calculated by the (“OR”) and agrees to make a monthly payment towards his debts, an IPO is made following intervention by the Court because the bankrupt does not accept the OR’s calculation and an amicable agreement can not be reached. The Court decides what level of a monthly payment is reasonable and then issues a Court Order forcing the bankrupt to make payments. The Order can be enforced with further Court action if required.

An IPA is an income payment request from the OR that is agreed to voluntarily. An IPO is an income payment that is ordered by the Court.”

An IVA is a formal binding agreement between a debtor and their creditors where creditors agree to a reduced or rescheduled debt repayment. Typically, the debtor will contribute both existing assets and a proportion of future earnings to pay all or an agreed proportion of their debts. An IVA is overseen by an insolvency practitioner who is known as the supervisor. The Supervisor will collect in and then distribute these funds to creditors. IVAs usually last for between three and five years but can be shorter or longer. IVAs are not available in Scotland.

This is where an individual or company cannot pay the debts they owe when they are due and/or the individual or company owes more than they own. People or companies in this situation can end up in a formal insolvency procedure (‘an insolvency’). Formal insolvency procedures are legal procedures designed to get debts repaid and to return individuals and, where possible, businesses to financial health.

The Insolvency Act 1986 is the primary legislation governing insolvency law and practice. Many other statutes and statutory instruments are also relevant, but the Insolvency Act 1986 is the primary legislation.

Insolvency practitioners are licensed independent specialists who are authorised to act in relation to an insolvent individual, partnership or company. An insolvency practitioner is appointed to supervise formal insolvency procedures. Insolvency practitioners have to act in the interest of creditors – they can either help the debtor/company turn their finances around, or, when this isn’t possible, they will gather in all the debtor's or company’s assets (if there are any), turn them into cash and distribute the proceeds back to creditors (in accordance with an ‘order of priority’ determined by the government).       

It is important to remember that where an individual or company has become insolvent, it is very likely that they will not have enough money or any money to pay back all or any of that which is owed.    Insolvency practitioners will do their best to ensure that as much as possible is repaid. 

Once formally appointed to look after an insolvent company or individual, the insolvency practitioners may be referred to as the ‘Office Holder’.

The Insolvency Rules 1986 (as amended) these Rules apply where the Act applies. Where the old Act continue to apply so do the Bankruptcy Rules 1952 and the Companies (Winding Up) Rules 1949. There are separate rules dealing with insolvent partnerships, insolvent deceased’s estates and deeds of arrangement.

The account at the Bank of England into which money raised from the sale of assets in bankruptcies and compulsory liquidations has to be paid. Money is then paid to creditors out of these accounts. The Insolvency Service charges fees on money paid into these accounts.

A term used when either an individual and/or company are unable to pay their debts as and when they fall due and/or their liabilities exceed their assets.

In a Scottish compulsory liquidation the insolvency practitioner appointed by the court when the ‘winding up’ order as made is called the interim liquidator. They act as liquidator until the initial meeting of creditors (within 28 days) appropriate their appointment, or appoints an alternative.

An interim order refers to an individual who intends to propose a voluntary arrangement to his creditor. He or she may apply to the court for an interim order which, if granted, precludes bankruptcy and other legal proceedings whilst the order is in force.

An interim receiver might be appointed by a court to protect and secure an insolvent individual’s property after a bankruptcy petition has been made to the court, but before the bankruptcy ‘order’ has been made.

In administrations and creditors voluntary liquidations an insolvency practitioner has an obligation to carry out an investigation into the conduct of the director(s) of the failed business and will welcome any input from creditors. If you have any additional information that may be helpful, please get in touch with the insolvency practitioner as a matter of urgency. 

The insolvency practitioner has to submit a confidential report on his findings to the Insolvency Service, who may decide to try and have the director(s) disqualified. If you think a director should have been disqualified but has not, you should write to the Insolvency Service and your local Member of Parliament (copying in your insolvency practitioner).   

In compulsory liquidations and bankruptcy the duty to investigate and report falls to the Official Receiver. In Scotland, the insolvency practitioner carries out that duty.

A statutory scheme operated by the SIB (Securities and Investments Board) to give individual investors up to £48,000 protection if an authorised investment business collapses.

When there is more than one party that has entered into credit agreements, each party named in the agreement become liable for the whole amount in the event the debt is not paid. In joint mortgages, for instance, each mortgagee can be pursued individually for the full amount outstanding.

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

This Act includes statutory powers and duties of a receiver appointed under a mortgage.

A type of security for lenders. Legal charges are secured against assets or property.

See ‘debts’.

Lien is the right to retain possession of assets or documents until the settlement of a debt.

A limited company is a company where the liability of directors and shareholders is limited to what has been guaranteed or invested into the company. The directors and shareholders of a limited company will not be liable for the debts of the company provided they have acted in a legal and professional manner and in the company’s interests at all times.

In respect of limited companies and limited liability partnerships the financial liability of directors, shareholders and partners is limited to a fixed sum. If a claimant is suing a limited company or a limited liability partnership, it is the entity (i.e. the company or partnership) that is being targeted, not its owners or investors.

Liquidation is the procedure whereby a company has its assets realised and distributed to satisfy, insofar as it is able, its liabilities and to repay its shareholders. The term winding-up is also used.

The insolvency practitioner who holds office in any type of Liquidation. The official receiver may only be liquidator in a compulsory liquidation.

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

A mortgage is a transfer of an interest in land or other property by way of security, redeemable upon performing the condition of paying a given sum of money.

Members Voluntary Liquidation is a process initiated by the shareholders of the company. It is commonly referred to as a solvent liquidation as a company can only be wound up in this manner if it is able to pay all of its debts with statutory interest within 12 months of issuing a declaration of solvency.

A contributory system of insurance that protects people against illness and unemployment. It also provides retirement pensions and other benefits. It is managed by HMRC.

A nominee is a licensed insolvency practitioner chosen by the individual or corporate debtor to conduct the process of putting a proposal for a voluntary arrangement to the creditors. The nominee's duties will include writing a report and comments on the proposal, and convening a meeting of creditors to consider it.

See insolvency practitioners and Official Receivers and AiB.

An official receiver (OR) is an official employed by the Insolvency Service, an executive agency of the Department of Business, Innovation and Skills, who is responsible for many aspects of bankruptcy and compulsory liquidation.

Insolvency Practitioners can be appointed to cases initially dealt with by the Official Receiver (bankruptcies and compulsory liquidations) through a rota of local insolvency practitioner firms. The aim of the rota is to ensure transparency and fairness of appointments.

The term onerous property in the context of a liquidation or bankruptcy, applies to unprofitable contracts and to property that is unsalable 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.

Where the Insolvency Act or Rules requires an office holder to deliver documents to creditors, they can decide that they don’t want to receive them by letting the office holder know.   This process of opting out currently applies in England and Wales only.

The order in which creditors are repaid their debts as a result of an insolvency procedure is determined by something called the Order of Priority. This order, or hierarchy, has been set out by the government. At the top of the order are secured lenders like banks; towards the bottom are unsecured lenders like trade suppliers.

Banks have priority so that they remain confident about lending large amounts of money to businesses.

Where are my debts in the order of priority?

In an insolvency, it is usually the case that there is not enough money left in a company’s or individual’s possession for all creditors to be repaid all that they are owed and it may well be that creditors aren’t repaid any of what they are owed.     

In an insolvency, it is usually the case that there is not enough money left in a company’s or individual’s possession for all creditors to be repaid all that they are owed and it may well be that creditors aren’t repaid any of what they are owed.  Because of this, the government has created an order of priority that determines the order in which creditors are paid back their money (or at least, what money can be paid back).       

This order prioritises secured lenders, like banks. These types of lenders are further up the order of priority so that they feel confident continuing to lend to businesses.  If there was very little chance that a bank would receive its money back in the event of one of its debtors becoming insolvent, the bank may be unwilling to lend to other businesses in the future.       

It is very important that you understand where you stand in this order. The higher up the order you are, the more likely you are to receive more of your money back.   

Secured or fixed charge creditors   

The costs and fees of the insolvency   

Preferential creditors   

Floating charge creditors     

Unsecured creditors     

Shareholders

PAYE is an income tax deducted by employers from their employee’s payroll on behalf of the government.

A fund that holds the contributions that have been paid by the employee and/or employer to provide a pension upon the employee’s retirement.

A personal guarantee is a promise made by a person or an organization to accept responsibility for some other party’s debt if the debtor fails to pay it. It is used typically in banking when the director of a company will personally guarantee the debts of a company.

A petition is a written application to the court for relief or remedy.

An act which established 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 per cent 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.

Companies or individuals give a preference if they do something to put a creditor in a better position on a bankruptcy or winding up. A liquidator or trustee in bankruptcy can apply for an order restoring the position to what it was before the preference. The preference must have taken place within a defined time limit prior to the start of the bankruptcy or liquidation and the court must be satisfied that it was made with the desire to prefer the creditor.

Certain types of creditor debts are given a legal priority in terms of repayment from an insolvency. These include the employees of an insolvent business, although only for certain debts: unpaid wages; holiday pay; and pension contributions. Only up to a set amount (determined by the government) will be paid out.      You might hear these creditors referred to as ‘prefs’.

A pre-packaged administration, usually referred to as a pre-pack, is an arrangement under which the sale of the company’s business and or assets is negotiated prior to the administration and is completed on or shortly after the administrator’s appointment.

A legal form completed by a creditor in a bankruptcy (known as sequestrations in Scotland), liquidations, voluntary arrangements, and administrations to state how much they believe they are owed. You will usually be asked by the insolvency practitioner, Official Receiver, or AiB to provide any supporting evidence you have for your claim – copy invoices, delivery notes, statements, etc. It is helpful to provide this a quickly as possible. You might see this referred to as a Statement of Claim form in a Scottish insolvency.

A PTD is a personal insolvency procedure available to Scottish residents only. It is voluntary but formal arrangement between a debtor and their creditors. The debtor makes ‘affordable’ monthly payments towards their debt for typically four years. A debtor grants a ‘Trust Deed’ in favour of the Trustee which transfers their assets to the Trustee for the benefit of creditors. It is overseen by the Accountant in Bankruptcy.

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

An insolvency practitioner (or official receiver) appointed to safeguard a company’s assets after presentation of a petitioned for a compulsory liquidation.

A person or company can appoint someone to go to a creditors’ meeting and vote in their place – a proxy. This can be the chairman of the meeting. A proxy form will need to be completed if a creditor wishes this to happen – if you need a proxy form and haven’t already been given one, you should speak to the Office Holder handling the insolvency in which you’re a creditor.          Several insolvency firms offer creditor services including attending creditors’ meetings on clients’ behalves.

A 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.

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.

A public limited company is entitled to offer its shares for sale to the general public. It must have issued shares worth at least £50,000, and one- quarter of the face value of those shares must have been paid up.

Partnership Voluntary Arrangement much like its counterparts the CVA and IVA, it does exactly what it says on the tin, a voluntary arrangement which is legally binding between a Partnership and its creditors with regard to the payment of either all or a percentage of debts owed.

A floating charge which purports to empower the holder to appoint an administrator or administrative receiver.

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.

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.

A receivership is the general term applied when a person is appointed as a receiver or administrative receiver over certain assets.

Redundancy is one form of dismissal. It occurs when a company is closing some or all of its business down, and there are no longer jobs available for some or all of the employees.

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

A procedure that cancels a winding-up order.

Retention of Title is where you, as a creditor, have an agreement with a customer that says the goods you have supplied remain your property until the customer has paid for them. If you have a Retention of Title claim to make, you need to let the insolvency practitioner or Official Receiver know as soon as possible and provide them with a copy of your terms and conditions as well as the details of your claim.

A colloquial term for reservation of title, derived from an important Court of Appeal case, Aluminium Industrie Vaassen BV v Romalpa Aluminium Limited (1975).

Also known as the Redundancy Payments Office. If your company is subject to insolvency proceedings and you wish to find out how your employees may be affected, please contact us.

A compromise or arrangement made under the authority of the Companies Act 1985 between a company and its creditors or members.

The Secretary of State for the Department of Trade and Industry

A secured creditor is a creditor who holds security over the company's assets (e.g. a bank, or other financial institution). This class of creditor is paid before ordinary creditors.

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. Security documents can be very complex. The commonest example is a mortgage over a property.

The Scottish name for 'bankruptcy' (bankruptcy is often used but sequestration is the traditional name).

Where A owes B and B owes A and B is insolvent, only the net balance may be paid or claimed, in certain circumstances.

A person who, without being formally appointed, gives instructions on which the directors of a company are accustomed to act.

Shareholders are the owners of limited companies. If the limited company is a quoted PLC, it is possible to trade its shares on the open market. Shareholders are entitled to vote on company matters, and they are entitled to a share of the company’s profits if it pays a dividend.

A person appointed by the sheriff who acts in the execution of writs and seizure of goods on judgment debts of the High Court. See also: Bailiff – county court.

A small debt means a debt for £1,000 or under which the office holder can decide to treat as having been proved for the purpose of paying a dividend. If the office holder decides to treat your debt in this way, you will be notified and told that you will not need to submit a proof unless you believe that the amount due to you is different from the amount the office holder has advised you.  You must tell the office holder if your claim does differ and will then be required to submit a proof in support of your claim.       

It is important to understand that if you want to take part in any decision procedure you must submit a proof regardless of whether the office holder has notified you that your debt is being treated as a small debt.   This treatment of debts currently applies in England and Wales only.

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

This details the company’s assets and liabilities when it is wound up, or enters into Liquidation, Receivership or Administration. The Statement of Affairs is prepared by the directors with the assistance of an Insolvency Practitioner.

See proof

Statements of Insolvency Practice are usually referred to as SIPs. SIPs set principles and key compliance standards with which Insolvency Practitioners are required to comply. You may access the SIPs here

A statutory demand is a formal notice requiring payment of a debt exceeding £750 within 21 days. It is used as the first step in bankruptcy and compulsory winding up.

Assuming the rights of a creditor following payment of that creditor’s claim.

The insolvency practitioner who runs a company or individual voluntary arrangement.

The insolvency practitioner records time spent on a case so creditors can see what work has been done. The type of activity logged can include day-to-administration, responding to correspondence from debtors or creditors, attending creditors’ meetings, realising the assets of an insolvent business or individual, or investigating the conduct of an insolvent business’ directors. Details of the insolvency practitioner’s time records might be included in their annual report or progress reports to creditors.

A transaction at undervalue refers to companies or individuals making a gift or entering into a transaction in which the value to them is significantly less than the value to the other party. Transactions at undervalue can be challenged by a liquidator or a trustee in bankruptcy.

(a) Trustee in bankruptcy – the authorized insolvency practitioner appointed to deal with the estate of the bankrupt; (b) Trustee under a deed of arrangement – the authorized insolvency practitioner appointed to deal with the estate of the person who entered into the deed.

The amount of money received by a company for the goods or services it supplies before any deductions are made for expenditure. It is important to note that the company’s turnover is not the same as its profits.

United Nations Commission on International Trade Law.

A person appointed by the sheriff, generally a solicitor, to take practical responsibility for the administration of the law in the county.

Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.

An unsecured creditor is any creditor who does not hold security). This class of creditor will rank last of all in cases where a dividend is likely to be paid.

If a bankruptcy or winding-up petition is issued to a debtor, it has the effect in practical terms of preventing the individual or company from disposing of any assets pending the Court hearing. Amongst other things it freezes all bank accounts. Permission to reactivate the bank account or dispose of an asset must be sought from the Court and backed up with reasons and confirmation that this will not be to the detriment of creditors. If agrees the Court will issue a Validation Order.

VAT is a duty that is levied on certain goods and services that are liable for this duty. Businesses must register for VAT if their taxable turnover exceeds a certain threshold set by the Government.

The relief obtained in respect of the VAT element of an unpaid debt. Previously available only when the debtor became insolvent, relief is now available on any debt unpaid for more than 6 months.

See individual voluntary arrangement (IVA) and company voluntary arrangement (CVA).

An agreement with a creditor that goods seized by them under an execution or distraint remain in the possession of the debtor and are not removed, giving the debtor further time to pay.

See liquidation.

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

When the directors of a company know or should know that it has no reasonable prospect of avoiding insolvent liquidation, they must take all reasonable steps to avoid losses to creditors. A liquidator can sue them if they fail to do this. A typical example of wrongful trading is where the directors trade on for too long and cause additional losses for creditors.