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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 a
petition 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.
The administration of the insolvent
estate of a deceased debtor.
County court process permitting an
individual with modest debts to pay off installments. No
insolvency practitioner is involved.
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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.
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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.
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The term applied when an insolvency
practitioner is appointed as an administrative
receiver.
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The insolvency practitioner appointed
by the court to handle the affairs of a company the subject
of an administration order.
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A special remedy to take control of the
assets of a farmer under the Agricultural Credits Act
1928.
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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.
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Someone against whom a bankruptcy order
has been made and who has not been discharged from
bankruptcy.
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The court order making an individual
bankrupt (this replaces the concept of the receiving order
and adjudication of bankruptcy in the old Act cases).
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Insurance cover needed by a person who
acts as an insolvency practitioner.
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The appropriation of real or personal
property for the discharge of a debt without giving the
creditor any property in, or possession of, the subject of
security.
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Court order placing restrictions on the
disposal of certain assets, such as property or securities,
given after judgement and gives priority of payment over
other creditors.
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Consolidation Act on the
disqualification of directors.
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A voluntary agreement for a company is
a procedure whereby a plan of reorganisation or composition
in satisfaction of 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.
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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.
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The placing of a company into
liquidation as a result of an application to the court,
usually by a creditor.
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Directors or shadow directors and their
associates, and associates of the company.
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Shareholder, every person liable to
contribute to the assets of a company in the event of it
being wound up.
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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.
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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.
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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.
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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. Often
also referred to as a floating charge, and the lender is
often referred to as the debenture holder.
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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.
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A director found to have conducted the
affairs of an insolvent company in an "unfit" manner may be
disqualified, on application to the court by the DTI, from
holding any management position in a company for between 2
and 15 years.
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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.
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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.
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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 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 (e.g. Customs & Excise or Inland
Revenue).
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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.
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Basis on which insolvency practitioners
prefer to sell a business. Effectively it means the business
continues, jobs are saved, and a higher price is
obtained.
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A legal commitment to repay a debt if
the original borrower fails to do so. Directors may give
guarantees to banks in return for the bank giving finance to
their companies. Companies in a group may guarantee each
others loans.
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A voluntary arrangement for an
individual is a procedure whereby the person comes to an
arrangement with his creditors in how their debt will be
discharged. Such a scheme requires the approval of the court
and is under the control of a supervisor.
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The state of not being able to pay
one's debts as they fall due or having an excess of
liabilities over assets.
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Primary legislation governing
insolvency law and practice. Nevertheless, many other
statues and statutory instruments are also relevant.
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A company goes into insolvent
liquidation if it goes into liquidation at a time when
assets are insufficient for the payment of its debts and
other liabilities and the expenses of liquidation.
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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.
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The Insolvency Rules 1986, as amended,
provide the detailed working procedures for the provisions
of the Insolvency Act 1986.
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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.
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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.
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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.
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1. Recognition of a debt by a
court.
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2. Decision given by a court at the
conclusion of a trial.
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Governs transactions in law and
property. Contains statutory powers of receivers appointed
under a fixed charge.
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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
failure of a property developer, whose borrowings will
largely be secured on specific properties.
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Right to retain possession of assets or
documents until settlement of a debt.
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The procedure whereby the assets of a
company (or partnership) are gathered in and realised, the
liabilities met and surplus, if any, distributed to
members.
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Committee of creditors who receive
information from the liquidator and sanction some of his
actions.
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The person appointed to deal with the
assets and liabilities of the company or partnership once
the resolution to wind up has been passed or a compulsory
winding up order has been made.
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Court order preventing the disposal of
assets.
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Shareholder of a company.
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A solvent liquidation where the
shareholders appoint the liquidator to realise assets and
settle all the company's debts in full within 12
months.
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Breach of duty in relation to the funds
or property of a company by its directors or
managers.
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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.
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The person chosen by the individual or
corporate debtor to report on the debtor's proposals for an
IVA or CVA.
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A person who is required to be a
qualified insolvency practitioner to hold the following
posts, of a liquidator, provisional liquidator,
administrator , administrative receiver, supervisor of a
voluntary arrangement, or trustee in bankruptcy.
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The civil servant employed by the DTI
to head the regional offices whose responsibilities cover
bankruptcies and compulsory liquidations.
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The term onerous property in the
context of a liquidation or bankruptcy, applies to
unprofitable contracts and to property that is unsaleable 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.
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A written application to the court for
relief or remedy.
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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.
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A payment or other transaction in the
six month to two year period preceding a liquidation,
administration or bankruptcy, which places a creditor or a
person connected with the insolvent, respectively, in a
better position than they would have been otherwise. A
liquidator, administrator or trustee in bankruptcy may
recover any sums which are found to be preferences.
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Defined in Schedule 6 of The Insolvency
Act 1986. Has priority when funds are distributed by a
liquidator, administrative receiver or trustee in
bankruptcy.
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The document submitted in an insolvency
to establish a creditor's claim. It may be informal (by e.g.
letter) or in a prescribed form (in bankruptcy and
compulsory liquidations).
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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".
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The person appointed by the court to
deal with the affairs of the company until a compulsory
winding up order.
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The authority given by a creditor or
member to another person (proxy holder) to attend a meeting
and speak and vote at a meeting on behalf of the creditor
(principal) or member.
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A person who is authorised to attend a
meeting on behalf of someone else.
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The person appointed by the court for
some specific purpose or the person appointed by a mortgage
to exercise his rights over the charges property under the
Law of Property Act 1925 (not to be confused with the
Official Receiver or Administrative Receiver.
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The general term applied when a person
is a appointed as a receiver or administrative receiver over
certain assets.
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An organisation approved by the
Secretary of State as being able to authorise its members to
act as insolvency practitioners.
A body may be recognised
if it regulates the practice of a profession and maintains
and enforces rules for securing that such of its members as
are permitted by or under the rules to act as insolvency
practitioners-
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(a) are fit and proper persons so to
act, and
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(b) meet acceptable requirements as to
education and practical training and experience.
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An agreement for the sale of goods to a
company, being an agreement;
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(a) which does not constitute a charge
on the goods, but
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(b) under which, if the seller is not
paid and the company is wound up, the seller will have
priority over all other creditors of the company in respect
to the goods or any property representing the goods.
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A creditor with specific rights over
some or all his debtor's assets in the event of insolvency.
In essence he is paid first from the secured assets.
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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.
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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.
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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.
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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.
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The person appointed to supervise the
implementation of the debtor's proposals for an IVA or CVA
once approved by creditors (and members).
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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.
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either
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in bankruptcy - the authorised
insolvency practitioner appointed to deal with the estate of
the bankrupt;
or
under a deed of arrangement - the
authorised insolvency practitioner appointed to deal with
the estate of the person who entered into the deed.
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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, ahead only of the
shareholders.
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Someone against whom a bankruptcy order
has been made and who has not been discharged from
bankruptcy.
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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.
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The placing of the company into
liquidation by resolution of the members - there are two
types of voluntary liquidation
member's voluntary
liquidation; and creditor's voluntary liquidation.
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The first of these does not involve
insolvency and comes about merely because the (shareholders)
members wish to have the value of their shareholding
realised e.g. on the retirement of the principals of the
company was incorporated has been fulfilled.
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(Or liquidation) - the procedure
whereby the assets of a company (or partnership) are
gathered in and realised, the liabilities met and the
surplus, if any, distributed to members.
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The order made by the court for a
company to be placed in compulsory liquidation.
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A winding-up petition is a petition
presented to the court seeking an order that a company be
put into compulsory liquidation.
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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 solvent liquidation. The directors involved may be made
personally liable to make a contribution to the company's
assets.
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