Insolvency, Liquidation & Bankruptcy Terms: The Ultimate UK Glossary
At Anderson Brookes, we understand that the insolvency, liquidation, and bankruptcy market can seem complicated. As a licensed insolvency practitioner with over 15 years of experience, our mission is to provide clarity, guidance, and support to individuals and business directors struggling with debt.
We have created this comprehensive UK glossary of insolvency terminology to help demystify the jargon and empower those in need of assistance. By understanding the key terms and processes involved in corporate and personal insolvency, you can make informed decisions and take control of your financial situation.
Our team of experts at Anderson Brookes is committed to offering tailored solutions to those facing the challenges of insolvency. We offer free consultations to assess your unique circumstances and explore the most appropriate options available, whether that be through administration, liquidation, or bankruptcy.
With our extensive knowledge and experience in the field, we aim to be a trusted resource for anyone seeking to understand the complexities of insolvency. This glossary is just one of the many ways we strive to support and educate our clients and the wider community.
If you or your business is facing financial difficulties, please don’t hesitate to reach out to our team at Anderson Brookes. We are here to help you find the best path forward and achieve a brighter financial future.
Free Consultation – advice@andersonbrookes.co.uk or call on 0800 1804 933 our freephone number (including from mobiles).
A to Z Insolvency Terms: Explained Quickly and Simply
A
Accountant in Bankruptcy (Scotland): The official appointed to oversee personal insolvency procedures in Scotland, acting as trustee when no insolvency practitioner is nominated.
Adjudicator: A government official who works for the Insolvency Service, and whose role is to review people’s bankruptcy applications and decide whether you can be made bankrupt. The Adjudicator is not a judge but he can make a bankruptcy order like a judge.
Administration: A formal insolvency procedure where an insolvency practitioner (administrator) takes control of a company to rescue it, achieve a better outcome for creditors, or realise assets for secured creditors.
Administrative Receiver: A person appointed by a secured creditor (usually a bank) to recover debts by selling company assets. This process has been mostly phased out under the Enterprise Act 2002.
Administrator: 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.
Annulment: The cancellation of a bankruptcy order, often due to full repayment or procedural errors.
Assets: Anything that you own or have a financial interest in. This includes your house or flat if you are a homeowner. It also includes your car and any money that might be owed to you including a claim for compensation.
B
Bailiff: A bailiff or enforcement agent is an individual authorised by the court to collect debts or seize assets on behalf of creditors. In the context of insolvency and liquidation, bailiffs may be appointed to recover outstanding debts or take possession of company assets to be sold in order to repay creditors. It’s important to note that there are strict rules and regulations governing the powers and actions of bailiffs in the UK.
Bankruptcy: A legal process where an individual is declared insolvent, and their assets are used to pay creditors. 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 Order: 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.
Bankruptcy Petition: A request (by a creditor or the debtor) to the court for bankruptcy proceedings to begin.
Bankruptcy Restrictions: These are things you are not allowed to do when you’re bankrupt, including borrowing £500 or more without letting the lender know you’re bankrupt, running or managing a company or working as an insolvency practitioner.
Bond: An IOU issued by companies or governments to raise capital. In the insolvency context, it refers to the insurance cover needed by a licensed insolvency practitioner when appointed to deal with the insolvency of a company.
Book Debt: Money owed to companies or individuals for goods or services that they have provided. Book debts are assets.
C
Charge: A security interest over an asset to ensure repayment of a debt (e.g., a mortgage).
Charging Order: 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.
Citizens Advice: A network of independent charities offering free and confidential advice, either in person, online or by phone. They offer advice to help you make the right choices for dealing with money issues.
Company Directors Disqualification Act 1986: UK legislation governing director disqualification due to misconduct.
Company Voluntary Arrangement (CVA): A legally binding agreement between a company and its creditors to repay some or all of its debt over a period of time.
Compulsory Liquidation: A court-ordered winding-up of a company, usually initiated by a creditor’s petition.
Composition: An agreement between a debtor and creditors where creditors agree to accept a lesser sum in satisfaction of their claims.
Contributory: A shareholder liable to contribute towards company debts if the shares are unpaid.
County Court Judgement (CCJ): 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.
Court-Appointed Receiver: 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.
Creditor: A person, company or other entity to whom you owe a debt including certain debts due in the future. In bankruptcy, the Official Receiver will notify your creditors of your bankruptcy. If you have sufficient assets, payments will be made from those assets by the trustee to your creditors.
Creditors’ Meeting: A formal meeting where creditors vote on insolvency matters, such as appointing a liquidator.
Creditors’ Voluntary Liquidation (CVL): A process where an insolvent company voluntarily winds up its affairs, overseen by a liquidator. See UK CVL Costs.
Credit Rating: A score system that lenders use to work out how reliable you are at paying back money. Bankruptcy affects your credit rating. It will stay on your credit file for six years after the bankruptcy order is made.
D
Debenture: 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.
Debt Relief Order (DRO): A personal insolvency solution for individuals with low income and little debt.
Default Notice: 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.
Diligence (Scotland): The Scottish equivalent of enforcement to pursue a claim after obtaining a court decree.
Discharge: Officially being freed from bankruptcy restrictions and most of your bankruptcy debts. You will usually be discharged after 12 months.
Dissolution: 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.
Distraint: 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.
Dividend (Insolvency Context): A payment made to creditors from available funds in an insolvency case.
E
Equity: The value of the property you own after deducting any secured debts (like a mortgage). If you jointly own your home the equity is usually split between the joint owners. Your interest in your home will be part of the bankruptcy and can be used to pay your creditors.
Estate (Bankruptcy): The assets available for distribution to creditors.
F
Factoring: 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.
Fixed Charge: A security interest over a specific asset, preventing its sale without creditor consent. Companies can create fixed charges; individuals cannot.
Floating Charge: A security interest over general company assets that crystallises if the company fails. It 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).
Fraudulent Trading: 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.
Frozen Bank Account: When a bankruptcy is made, your bank accounts will most likely be frozen by the bank. You will not be able to access money in your bank account if it is frozen. This is because any money in your account may be an asset and may be claimed by the trustee.
G
Guarantee: A legally binding commitment to repay a debt if the original borrower defaults.
The Gazette: The combination of three publications: The London Gazette, The Belfast Gazette and The Edinburgh Gazette. The Gazettes are official journals of record. Bankruptcies are published in The Gazette.
H
High Court Enforcement: High Court Enforcement is the process of enforcing judgments and orders issued by the High Court in England and Wales. This is carried out by authorised High Court Enforcement Officers (HCEOs), who have the power to seize assets and recover debts on behalf of creditors. HCEOs can be instructed to enforce judgments for sums over £600, offering a swift and effective means of securing payment from debtors.
Hire Purchase Agreement: An agreement where you hire goods and make regular payments towards eventually owning them. Some hire purchase agreements end when you become bankrupt, and you may have to return the goods. Check the terms of your agreement to see what happens if you become bankrupt.
I
Income Payments Agreement (IPA): A payment – usually made monthly – which you make towards your debts if you earn enough to have money left over after paying your essential living costs. You could be asked to pay money towards your debts through an IPA, during and for up to three years after bankruptcy.
Income Payments Order (IPO): A court order for payments towards your debts (if you can afford it) during your bankruptcy. Your trustee can apply for an IPO if you can’t agree on payment amounts for an IPA.
Individual Insolvency Register: Shows details of people who are in formal arrangements (including bankruptcy) to deal with their debts in England and Wales. It also lists details of individuals who have extended bankruptcy restrictions or debt relief restriction. Anyone can search the insolvency register on the internet.
Individual Voluntary Arrangement (IVA): A procedure whereby the person comes to an arrangement with their creditors in how their debt will be put forward to creditors. Such a scheme requires the approval of 75% by value of the creditors who vote and is under control of a supervisor who must be an insolvency practitioner.
Insolvency: The inability to pay your debts when they become due, or when your liabilities (debts) are greater than your assets.
Insolvency Act 1986: The primary legislation governing insolvency law and practice in the UK.
Insolvency Practitioner (IP): A person licensed by his/her recognised professional body to act as an office-holder in an insolvency proceeding.
Insolvency Service: A government agency that supports people through bankruptcy and deals with misconduct and fraud. The Insolvency Service operates the online bankruptcy application system.
Interim Order: An individual who intends to propose a voluntary arrangement to his creditor may apply to the court for an interim order which, if granted, precludes bankruptcy and other legal proceedings whilst the order is in force.
Interview with Official Receiver: An interview (usually by phone) that you must attend with the Official Receiver after the bankruptcy order has been made to discuss your financial circumstances. The Official Receiver will ask you about your financial affairs and the circumstances that led to your bankruptcy.
J
Joint Liability: 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.
L
Lien: The right to retain possession of assets or documents until settlement of a debt is made.
Liquidation: 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.
Liquidator: A licensed insolvency practitioner appointed to wind up a company.
London Gazette: The official government publication where insolvency notices are published.
M
Members’ Voluntary Liquidation (MVL): A solvent liquidation of a company, where the shareholders appoint a liquidator to realise assets and settle all of the company’s debts.
Member (Company): A registered shareholder.
Money Advice Service: An independent service, set up by the government, to help people manage their money including giving free and impartial debt advice.
Mortgage: 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.
N
Nil tax code (NT): HMRC will apply a ‘nil tax code’ (which will show as NT on your pay details) when you’re bankrupt. This tells your employer not to take any further income tax from your wages for the rest of the tax year (ending on 5 April).
Nominee (CVA/IVA): 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.
O
Official Receiver (OR): An official employed by the Insolvency Service who is responsible for many aspects of bankruptcy and compulsory liquidation. The Official Receiver is the government official who initially deals with your bankruptcy if an order is made by the Adjudicator or the court.
Officer (Company): A director or secretary of a company.
P
Preferential Creditor: Certain creditors who receive priority for payment in an insolvency, such as employees.
Prescribed Part: A portion of assets in a company insolvency set aside for unsecured creditors.
Phoenix Company: A new company that arises from an insolvent predecessor, often with similar assets and directors. While legal in the UK, strict rules govern phoenix companies to prevent abuse. Directors must exercise caution and seek professional advice from a licensed insolvency practitioner to ensure compliance. At Anderson Brookes, our experts can guide you through the intricacies of phoenix companies and help you make informed decisions.
Proof of Debt: A statutory form completed by a creditor in a company insolvency to state their claim.
Provisional Liquidator: An insolvency practitioner appointed by the court to preserve a company’s assets pending the hearing of a winding-up petition.
Proxy: A person appointed by a creditor or shareholder to vote on their behalf at meetings.
R
Receiver: A person appointed in a company insolvency to collect, realise, and distribute assets for secured creditors.
Receivership: A process in which a receiver is appointed to realise assets on behalf of a secured creditor.
Redundancy: The statutory right of an employee to compensation when they are dismissed due to job roles no longer existing.
Registrar of Companies: An official who maintains the register of companies at Companies House.
Remuneration: Fees and expenses paid to insolvency practitioners from estate funds.
Repossession (Property): The act of taking back a property by a lender when mortgage payments are not made.
Reservation of Title: A clause in a contract that allows a seller to retain ownership of goods until paid for in full.
Ring Fencing (Bankruptcy): The legal separation of an individual’s business and personal assets in bankruptcy.
Rogue Director: An unfit company director who has committed an insolvency offense or breached fiduciary duties.
S
Scheme of Arrangement: A statutory procedure allowing a company to reach a binding compromise with creditors.
Secretary of State: Refers to the government minister responsible for insolvency law, currently the Secretary of State for Business, Innovation and Skills.
Secured Creditor: A creditor with a legal right over a debtor’s asset as security for a debt.
Set-Off: The right to balance mutual debts between a creditor and debtor, settling the net difference.
Shadow Director: A person not officially appointed as a director but in accordance with whose instructions company directors are accustomed to act.
Shareholder (Member): The owner of shares in a company limited by shares.
Statement of Affairs: A document sworn by a bankrupt or company officer detailing assets, debts and creditors.
Statutory Demand: A formal written demand for payment of a debt exceeding £750 (individual) or £5000 (company) within 21 days, after which a bankruptcy or winding-up petition can be presented.
Supervisor: The insolvency practitioner appointed to implement an approved voluntary arrangement.
T
Trustee in Bankruptcy: The insolvency practitioner who takes control of the bankrupt’s assets, realises them and distributes the proceeds to creditors. The trustee may be the OR or an IP.
U
Undischarged Bankrupt: A person who is currently subject to bankruptcy restrictions, not yet released from the bankruptcy procedure.
Unliquidated Claim: A damages claim with an unspecified or undetermined value.
Unregistered Company: A company not registered under the Companies Acts, often a partnership or sole trader.
Unsecured Creditor: A creditor who does not hold security (such as a mortgage) for the money they are owed.
V
Validation Order: A court order permitting a transaction by a company after presentation of a petition to wind it up.
Voluntary Liquidation: Liquidation of a company by resolution of its members (shareholders).
W
Winding-Up: The process of liquidation, realising assets and closing a company’s affairs by a liquidator.
Winding-Up Petition: A court application by a creditor or the company itself for liquidation on grounds of insolvency.
Wrongful Trading: Liability for company directors if they should have realised there was no prospect of avoiding insolvent liquidation but continued to trade.
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