IVA Glossary
Authorised Insolvency Practitioner
The person (usually an accountant or solicitor) authorised by the Department of Trade and Industry (DTI) or a professional body to act as trustee, nominee, supervisor, liquidator, administrative receiver or administrator. Only such a person can hold any of these offices.
Administrative Receiver
The person appointed by the holder of a floating charge debenture over a company’s assets to collect in and realise the assets of that company and to repay the indebtedness to the debenture holder.
Administrative Receivership
The term applied when an insolvency practitioner is appointed as an administrative receiver.
Administrator
The insolvency practitioner appointed by the court to handle the affairs of a company the subject of an administration order.
Agricultural Receivership
A special remedy to take control of the assets of a farmer under the Agricultural Credits Act 1928.
Associates
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.
Bankrupt
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.
Bankruptcy Order
The court order making an individual bankrupt (this replaces the concept of the receiving order and adjudication of bankruptcy in the old Act cases).
Bond
Insurance cover needed by a person who acts as an insolvency practitioner
Company Voluntary Arrangement (CVA)
A procedure whereby a plan of reorganisation or composition, in satisfaction of a company’s debts, is put forward to creditors and shareholders. There is limited involvement by the court and the scheme is under the control of a supervisor.
Composition
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.
Compulsory Liquidation
The placing of a company into liquidation as a result of an application to the court.
Contributory
Shareholder, every person liable to contribute to the assets of a company in the event of it being wound up.
Court-Appointed Receiver
A person, not necessarily a licensed insolvency practitioner, appointed to take charge of assets usually where they are subject to some legal dispute. Not strictly an insolvency process, the procedure may be used other than for a limited company, e.g. to settle a partnership dispute.
Creditors’ Committee
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 (CVL)
Relates to an insolvent company. It is commenced by resolution of the shareholders, but is under the effective control of creditors, who can choose the liquidator, liquidation committee.
Debenture
A document that either acknowledges or creates a debt. The expression is commonly used to describe a document that confers a fixed and floating charge over all the assets and undertakings of a company.
Deed of Arrangement
This is a method by which an individual may come to terms with creditors, outside formal bankruptcy. The procedure has now been almost completely supplanted by voluntary arrangements.
Disabilities of a Bankrupt
It is a criminal offence for an undischarged bankrupt to:-
- Act as a director or take part in the management of a limited company;
- Obtain credit of over £250 without disclosing his status;
- Trade in a name other than the one that he/she was made bankrupt in;
- Hold certain public and other offices
Discharge
A bankrupt usually receives an discharge from bankruptcy automatically no more than a year after he was made bankrupt. Discharge means he is freed from the disabilities of being a bankrupt. A discharge can be suspended by the court in cases where a bankrupt has been guilty of misconduct.
Disqualification of Directors
A director found to have conducted the affairs of an insolvent company in an unfit manner will be disqualified, on application to the court by the DTI from holding any management position in a company. The disqualification may apply for any period between two and fifteen years. Such a director may also consent to being disqualified for a specified period, by giving a disqualification undertaking if he/she wishes to avoid the costs of a court application.
Fixed Charge
A fixed charge is a form of security granted over specific assets, preventing the debtor dealing with those assets without the consent of the secured creditor. It gives the secured creditor 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.
Fraudulent Trading
Fraudulent trading occurs when a company carries 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 liabilities.
Individual Voluntary Arrangement (IVA)
A procedure whereby a scheme of arrangement of an individual’s affairs, or a composition in satisfaction of his debts, is put forward to creditors. Such a scheme, once approved, becomes under the control of a supervisor. “fast-track” voluntary arrangement can be proposed in smaller bankruptcy cases to replace the bankruptcy and the supervisor will be the Official Receiver.
Insolvency
Defined as a debtor having insufficient assets to meet all debts, or being unable to pay debts as and when they are due. If a creditor can establish either test, he will be able to present a winding-up petition against a company or a bankruptcy petition against an individual.
Insolvency Act 1986
Primary legislation governing insolvency law and practice. Many other statutes and statutory instruments are also relevant.
Insolvency Services Account
An account maintained by the Department of Trade and Industry, through which funds must be passed in compulsory liquidations and bankruptcies.
Insolvent Liquidation
A company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and other expenses of liquidation in full.
Insolvent Partnerships Order 1994 (IPO)
An Order setting out the procedures for dealing with insolvent partnerships. The Order provides for winding up an insolvent partnership as an unregistered company, with or without concurrent insolvency proceedings against individual partners; for the joint bankruptcy of individual partners, without winding up the partnership as an unregistered company; and for the application of the administration and company voluntary arrangement procedures to insolvent partnerships.
Insolvent
The state of not being able to pay one’s debts as they fall due or having an excess of liabilities over assets.
Insolvency Practitioner (IP)
Person authorised by one of the chartered accountancy bodies, the Law Societies, The Insolvency Practitioners Association or the Department of Trade. The only person who may act as office holder in an insolvency proceeding.
Insolvency Rules
The Insolvency Rules 1986, as amended, provide the detailed working procedures for the provisions of the Insolvency Act 1986.
Interim Order
An individual who intends to propose a voluntary arrangement to his creditors may apply to the court for an interim order which, if granted, precludes bankruptcy and other legal proceedings whilst the order is in force.
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.
Person
An individual or corporation.
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 a compulsory liquidation to state how much is claimed. The form is supplied by the Liquidator.
Provisional liquidator
OR/IP appointed to preserve a company’s assets pending the hearing of a winding up petition.
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.
Public examination
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.
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.
Receiver
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.
Receivership
A company in administrative receivership is often said to be “in receivership”.
Rescission
A procedure that cancels a winding-up order.
Release
The process by which the Official Receiver or an insolvency practitioner is discharged from the liabilities of office as trustee/liquidator or administrator.
Secretary of State
The Secretary of State for the Department for Business, Innovation & Skills
Secured creditor
A creditor who holds security, such as a mortgage, over a person’s assets for money owed.
Shadow director
A person who, without being formally appointed, gives instructions on which the directors of a company are accustomed to act.
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 carrying out of a 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.
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.
