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Glossary of Terms

Administration Order

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, allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action of its creditors.

Administrative Receiver

Appointed by the holder of a floating charge covering the whole, or substantially the whole, of a company’s property. He 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. Sometimes abbreviated to receiver.

Administrative Receivership

The term applied when a licensed insolvency practitioner is appointed as an administrative receiver.


A licensed insolvency practitioner appointed by the Court under an administration order to achieve the purposes set out in the order. The administrator will need to produce a plan, known as his proposals for approval by the creditors to achieve this.


Bankruptcy is the process of dealing with the estate of a bankrupt. A bankrupt is an individual against whom a bankruptcy order has been made by the Court. 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 creditors.


A right given to the creditor to have a designated asset of the debtor appropriated to the discharge of the indebtedness, but not involving any transfer either of possession or ownership.

Company Directors Disqualification Act (1986)

Consolidation Act on the disqualification of persons from being directors or otherwise concerned with a company’s affairs.

Company Voluntary Arrangement (CVA)

A voluntary arrangement for a company is a procedure whereby a plan of reorganisation or composition in satisfaction of its debts, is put forward to creditors and shareholders. There is a limited involvement by the Court and the scheme is under the control of a supervisor.


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

Compulsory Liquidation

A compulsory liquidation of a company is a liquidation ordered by the Court. This is usually as a result of a petition presented to the Court by a creditor and is the only method by which a creditor can bring about a liquidation of its debtor company.

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 (cf Liquidation Committee).

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.


Broadly speaking, a document which either acknowledges or creates a debt. The expression is commonly used to denote a document conferring a fixed and floating charge over all the assets and undertakings of a company.

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 between 2 and 15 years.

Floating Charge

A floating charge is a form of security granted to a creditor over general assets of the company which may change from time to time in the normal course of business (e.g. stock). The company can continue to use the assets in its business until an event of default occurs and the charge crystallises. If this happens, the secured creditor can realise the assets to recover his debt, usually by appointing an administrative receiver, and obtain the net proceeds of sale subject to the prior claims of the preferential creditors.

Fraudulent Trading

Where a company has carried 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 voluntary arrangement for an individual is a procedure whereby a scheme of arrangement of his affairs or composition in satisfaction of his debts is put forward to creditors. Such a scheme requires the approval of the Court and is under the control of a supervisor.


Defined as 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. For a bankruptcy petition, inability to pay is the only available ground.

Insolvency Act 1986

Nevertheless, many other statutes and statutory instruments are also relevant.

Insolvent Liquidation

A company goes into insolvent liquidation if its goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of liquidation.

Insolvency Partnership 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 partnerships, without winding up the partnership as an unregistered company; and for the application of the administration and company voluntary arrangement procedures to insolvent partnerships.

Insolvency Practitioner (IP)

See Licensed Insolvency Practitioner.

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.

Law of Property Act 1925

Governs transactions in law and property. Contains statutory powers of receivers appointed under a fixed charge.

LPA Receiver

Law of Property Act 1925 receiver: a person (not necessarily an insolvency practitioner) appointed to take charge of a mortgaged property by a lender whose loan is in default, usually with a view to sale or to collect rental income for the lender. Common in the case of the failure of a property developer, whose borrowings will largely be secured on specific properties.

Licensed Insolvency Practitioner (IP)

Person licensed 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 an office holder in an insolvency. Persons claiming to be insolvency practitioners, but who do not hold a licence may not be able to help you. The status of anyone claiming to be a licensed insolvency practitioner can be confirmed by calling SPI or one of the regulatory bodies listed in Section 12 – useful Contacts.


Liquidation is a process 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. Liquidation is a terminal process and is followed by the dissolution of the company.

Liquidation Committee

Committee of creditors who receive information from the liquidator and sanction some of his actions (c.f. Creditors’ Committee).


Licensed insolvency practitioner appointed to wind-up a company.

Members’ Voluntary Liquidation (MVL)

A solvent liquidation where the shareholders appoint the liquidator to realise assets and settle all the company’s debts, plus interest, in full within 12 months.


Licensed insolvency practitioner nominated in a proposal for an individual or corporate voluntary arrangement to act as supervisor of the arrangement.

Office Holder

A liquidator, provisional liquidator, administrator, administrative receiver, supervisor of a voluntary arrangement, or trustee in bankruptcy.

Official Receiver (OR)

Officer of the Court, civil servant, member of the Department of Trade Insolvency Service, deals with bankruptcies and compulsory liquidations.

Partnership Voluntary Arrangement (PVA)

The term used to describe the company voluntary arrangement procedure as applied to partnerships under the provision of The Insolvent Partnerships Order 1994.


A written application to Court for relief or remedy.


A payment or other transaction made by an insolvent company or individual which places a creditor in a better position than they would have been otherwise. A liquidator, administrator or trustee in bankruptcy may recover sums which are found to be preferences. If the transactions took place within a period of either two years (where the creditor is a connected person) or six months (in other cases) of the insolvency.

Preferential Creditor

Defined in Schedule 6 of The Insolvency Act 1986. Has priority when funds are distributed by a liquidator, administrative receiver or trustee in bankruptcy.

Proof of Debt

Document submitted by a creditor to the licensed insolvency practitioner giving evidence of the amount of the debt. Only used in compulsory liquidations.

Provisional Liquidator

The name usually given to a licensed insolvency practitioner appointed to safeguard a company’s assets after presentation of a winding-up petition but before a winding-up order is made.


Document whereby a creditor authorises another person to represent him at a meeting of creditors. The proxy may be a general proxy, giving the proxyholder a discretion as to how he votes, or a special proxy requiring him to vote as directed by the creditor. A body corporate can only be represented by a proxy.

Proxy holder

Person who attends a meeting on behalf of someone else.


Is often used to describe an administrative receiver, who may be appointed by a secured creditor holding a floating charge over a company’s assets. More accurately, a receiver is the person appointed by a secured creditor holding a fixed charge over specific assets of a company in order to take control of those assets for the benefit of the secured creditor.


The general term applied when a person is appointed as a receiver or administrative receiver.

Reservation of Title (or Retention of Title)

A provision under a contract for the supply of goods which purports to reserve ownership of the goods with the supplier until the goods have been paid for. A complex and continually evolving area of law.

Scheme of Arrangement

A term normally used to describe a compromise or arrangement between a company and its creditors or members or any class of them under section 425 of the Companies Act 1985, which may involve a scheme for the reconstruction of the company. If a majority in number representing three-fourths in value of the creditors or members or any class of them agree to compromise or arrangement it is binding if sanctioned by the court. Section 425 may be invoked where there is an administration order in force in relation to the company where there is a liquidator or provisional liquidator in office, or where the company is not subject to any insolvency proceedings. The term is also used in section 1 of the Insolvency Act 1986 in relation to company voluntary arrangements.

Secured Creditor

A creditor with specific rights over some or all of the debtor’s assets. A secured creditor gets paid first out of the proceeds of sale of the security.


A charge or mortgage over assets taken to secure payments 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.

Shadow Director

A person who is not formally appointed as a director, but in accordance with whose directions or instructions the directors of a company are accustomed to act. However, a person is not a shadow director merely because the directors act on advice given by him in a professional capacity.

Statutory Demand

A formal notice requiring payment of a debt exceeding £750 within 21 days, in default of which bankruptcy or liquidation proceedings may be commenced without further notice. Cannot be used where the debt is disputed.


The licensed insolvency practitioner appointed by creditors to supervise the way in which an approved voluntary arrangement is put into effect.

Transaction at an Undervalue

A transaction at an undervalue can describe either a gift or a transaction in which the consideration received is significantly less than that given. In certain circumstances such a transaction can be challenged by an administrator, a liquidator or a trustee in bankruptcy.


Quite apart from its common usage (e.g. under the Trustee Act 1925) this is a term used for a variety of insolvency appointments, including the licensed insolvency practitioner appointed in an English bankruptcy; a Scottish sequestration; a deed of arrangement; a Scottish trust deed and an administration order (of the affairs of a deceased director).

Unsecured Creditor

Strictly, any creditor who does not hold security. More commonly used to refer to any ordinary creditor who has no preferential rights, although, in fact preferential creditors will almost always also be unsecured. In any event, the last in the queue, apart from shareholders.

VAT Bad Debt Relief

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 where debt is 6 months old at the relevant date.

Voluntary Arrangement

See Individual Voluntary Arrangement (IVA) and Company Voluntary Arrangement (CVA).

Voluntary Liquidation

See creditors’ voluntary liquidation and members’ voluntary liquidation.


See liquidation.

Winding-up Order

Order made by the Court for a company to be placed in compulsory liquidation.

Winding-up Petition

A petition presented to the Court seeking an order that a company be put into compulsory liquidation.

Wrongful Trading

Applied to companies in liquidation where a director allowed the company to continue trading in circumstances where he should have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation. The directors involved may be made personally liable to make a contribution to the company’s assets.

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