It is a formal procedure available to a company or a partnership and is instigated with the objective of either, rescuing the company, achieving a better result than on a winding up or to realising funds to pay preferential or secured creditors.
A licensed insolvency practitioner appointed to manage the business and property of the company which is in administration. The administrator will prepare proposals for the creditors setting out how the purpose of the administration will be received. An administrative receiver has the power to carry on the business of the company and to sell the business and any other assets comprised in the security to repay the secured and the preferential creditors.
An administrator is a licensed insolvency practitioner appointed in relation to take control of company when it goes to administration set out in the Insolvency Act 1986. An administrator is either appointed by the directors, a qualifying floating charge holder of the court.
A bankrupt is an individual against whom a bankruptcy order has been made by the court and who has not been discharged from bankruptcy.
When an individual cannot pay his/her debts, an order is being made by the court based on either a creditor’s or debtor’s petition, which makes an individual bankrupt. Subject to certain restrictions, the property and assets of the bankrupt, will be sold and the money is distributed to the creditors.
A creditor can be a company or an individual person who lends money to an individual or a company.
An order made by the court which gives a legal charge on the debtor’s interest in his/her home. This continues even after the debtor is discharged from bankruptcy.
A company voluntary arrangement (CVA) involves directors entering into an agreement with their creditors that states how the company debts are to be repaid and handled
Compulsory Liquidation involves winding up of a company after a petition to the court, usually by a creditor such as HMRC.
Creditor’s Voluntary Liquidation is a formal insolvency procedure when the shareholder usually at the director’s request decide to put the company into liquidation. As the company is insolvent and can’t pay off its debts, the appointed licensed insolvency practitioner collect the company’s assets and distribute them to the creditors in accordance with the law.
An individual or company who owes money to another person or company for services they have provided.
A debenture is a document stating the terms of a loan, usually to a company to provide clarity and security to lenders if the borrowing company becomes insolvent. Having a floating charge on the debenture enables the holder to rank above unsecured creditors when it comes to repayment.
Company dissolution is cost effective way of voluntarily striking a solvent company off the register at Companies House. This is applicable to companies who are solvent, have not traded or changed the company name in the last 3 months prior to an application.
A fixed charge is a form of security granted over specific assets. This prevents the debtor from dealing with those assets without the consent of the secured creditor.
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. The company can use the assets without the consent of the secured creditor until charge becomes fixed.
Fraudulent trading is the situation where someone has continued to trade knowingly, with the intention of deceiving the creditors. Punishments with fraudulent trading is more severe leading to imprisonment. As it can have a severe impact on your professional and personal life, it should be avoided at all costs
An Individual Voluntary Arrangement (IVA) is an agreement between you and your creditors where you agree to pay back a certain amount over a defined period of time. The amount and the period of time will vary from one case to another. In the majority of cases an IVA lasts for 5 years. In an IVA you pay regular payments to an Insolvency Practitioner who will divide this money between your creditors.riod decided upon by the court.
The Insolvency Act 1986 is the primary legislation governing insolvency law and practice.
An Insolvency Practitioner abbreviated as (IP) is licensed to act on behalf of an insolvent individual or company when they are financially distressed. An IP can also help directors of solvent companies to liquidate their company by Member’s Voluntary Liquidation (MVL).
A company goes into insolvent liquidation when it cannot pay of the bills or the value of business assets is less than the liabilities.
An Interim Order refers to an individual who tends 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.
Lien is the right to retain possession of assets or documents until settlement of debt is made.
Liquidation/Winding up is the process by which a company’s assets are realised and distributed to the creditors and if applicable to the shareholders. Liquidation is usually terminal process, followed by the dissolution of the company.
A Liquidator is a Licensed Insolvency Practitioner (IP) appointed to dissolve/wind up a company. They are responsible for selling the company’s assets and distributing the proceeds to creditors.
A member’s voluntary liquidation is a solvent liquidation where the shareholders appoint the liquidator to realise the assets and settle all of the company’s debts.
A nominee is a Licensed Individual Practitioner nominated in a proposal for an individual or company voluntary arrangement to act as a supervisor of the arrangement.
An Official Receiver (OR) is a civil servant employed by the Insolvency Service who deals with bankruptcies and compulsory company liquidations.
A petition is a written application to the court for relief or remedy.
When a company enters into insolvent liquidation, a preferential creditor is entitled to receive certain payments in priority to other unsecured creditors.
Proof of debt is the statutory form submitted by a creditor to the licensed insolvency practitioner or official receiver giving evidence of the amount claimed.
A proxy is a person appointed by another entity to represent them at the meeting. They are entitled to attend the meeting and vote on behalf of the person or entity they are representing. A proxy form must be completed by creditors or shareholders to appoint a proxy for a creditor’s or shareholders’ meeting.
A receivership is the general term applied when a person is appointed as a receiver or administrative receiver
A security creditor is a creditor who holds security over company’s assets (example, a bank or other financial institution). This class of creditor is paid before ordinary creditors.
A formal notice requiring a payment of debt exceeding £750 in 21 days. Failure to make this payment, bankruptcy or liquidation proceedings may be commenced without further notice.
A creditor who doesn’t hold security in relation to the debtor. This class of creditor will rank last of all in cases where a dividend is likely to be paid. The unsecured creditors can include suppliers, customers, HMRC and contractors.
A winding up order is a court order that forces a company into compulsory liquidation. In this stage the appointed Official Receiver (OR) by the court sells the company assets and distributes them amongst the creditors, the company will be closed and the directors’ conduct in the management of the company will be investigated
A winding up petition is a legal notice put forward to the court by a creditor when he is owed more than £750 and not has been paid for more than 21 days. WUP is the first stage of the process and it is in this stage you can challenge the petition if need be. This is because if the WUP is approved by the court, then it becomes extremely difficult to save the company from being liquidated. If you have been served the petition, contact a licensed insolvency practitioner quickly to explore the options available.
According to Insolvency Act 1986, when a company becomes insolvent and is unable to pay the debts, if it continues to carry on their business, it is considered as wrongful trading. It is usually lack of proper judgement or the failure of directors’ responsibilities that leads them to continue the insolvent business with the hope of that things will improve. If the directors found guilty of wrongful trading, they can be disqualified from being a director, fined or even imprisoned.