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Augusta Kent is an independent Insolvency Practice based in Canterbury serving clients and professionals across Kent, London and the UK.

ACCA Quality Checked

Augusta Kent has been awarded the ACCA Quality Checked standard in recognition of the high quality advice and value of service we offer to our clients – the first independent insolvency practice in Canterbury to do so.

The ACCA Quality Checked scheme was established 10 years ago and recognises firms who achieve high standards in customer care through the application of robust, quality procedures in all areas of their practice.

The world of finance contains terms which have little or no meaning to non-professionals and insolvency is no exception. Commonly used words have different contexts and there is huge scope for frustration and confusion for our clients.

At Augusta Kent we understand this and have attempted to demystify some of the more commonly used terms and phrases used within the Insolvency Industry with our glossary.

More importantly, we will explain everything to you, in full at every stage, with as little jargon as possible.

Use the alphabet below to navigate to the relevant section:

A

Administration Order (also referred to as Administration)

A rescue procedure where a licensed insolvency practitioner is appointed either by a floating charge holder, the directors of the Company, or the Court. This order places the control of the company in the hands of an Administrator (always a licensed insolvency practitioner) and protects the company and its assets from any action by its creditors to enable a reorganisation or realisation of its assets to be undertaken.

Administrative Receiver (also known as Receiver)

A licensed insolvency practitioner appointed by the holder of a qualifying floating charge held over the company’s assets. The Receiver has the power to run the company and sell the business and assets to repay the floating charge holder.

Administrative Receivership (also referred to as Receivership)

When a qualifying charge holder appoints a licensed insolvency practitioner over the company’s assets to repay the debt owing by the company to it.

Administrator

The licensed insolvency practitioner appointed in relation to the administration order. The IP has a general duty of care to all creditors of the company.

B

Bankruptcy

A formal insolvency procedure whereby an individual is declared bankrupt by the court signifying that the individual is unable to pay debts owed. The bankrupt’s assets (including any interest in property) are then realised and distributed amongst all creditors.

C

CCJ (County Court Judgement)

A county court decision in favour of a creditor with respect to a debt owed by an individual or company.

Charge

Security held by a creditor (usually a bank) over the fixed and/or floating assets of a company.

Company Director

An officer of the company who runs the company in the best interests of the shareholders.

Company Directors Disqualification Act (1986)

Legislation concerning the disqualification of person or persons from acting as directors or being involved in the management of a company’s affairs.

Company Voluntary Arrangement (CVA)

A more informal insolvency procedure where the Company proposes a plan involving company reorganisation or realisation of company assets for a schedule of repayment of debt to creditors and shareholders.

Compulsory Liquidation

A formal insolvency procedure typically brought about as a result of a creditor of the company petitioning the court to wind up the company due to unpaid debt owed (worth over £750).

Court-Appointed Receiver

A little used procedure where a person is appointed by the court to take charge of assets which are commonly under dispute.

Creditors’ Committee

Formed from the general body of creditors to supervise the activity of the administrator or trustee of a bankruptcy, or to receive reports of an administrative receiver.

Creditors’ Voluntary Liquidation (CVL)

A formal insolvency process available to an insolvent company. It begins with a resolution being passed by the shareholders of the Company to appoint a licensed insolvency practitioner as liquidator which is subject to subsequent approval by creditors, who can agree or select a different liquidator.

Creditors’ Meeting

A meeting of creditors in which creditors can put forward their views and vote on resolutions put before them.

D

D Report

Stands for ‘Directors report’. When Liquidators, Administrators or Receivers are appointed over a company, they must submit a report on the conduct of all directors and shadow directors of the company to Department for Business Enterprise and Regulatory Reform (BERR). BERR will conduct investigations where appropriate and can commence disqualification proceedings against those directors who they believe are unfit to act as company directors.

Debenture (Mortgage Debenture)

A type of legal mortgage, usually held by banks, comprising fixed and floating charges over a company’s assets.

Disqualification of Directors

If Department for Business Enterprise and Regulatory Reform find, following investigations and upon application to court, that a director of an insolvent company has conducted his affairs in an ‘unfit’ manner then that director can be disqualified from holding management positions from 2 to 15 years.

Dividend

Term used for the distribution of monies to creditors or shareholders of a company.

F

Fixed Charge

A type of legal security placed over the fixed assets of a company (i.e. building or land).

Fixed Charge Receiver

A licensed insolvency practitioner, who is appointed by a creditor who holds a charge over the fixed assets of a company, to repay money lent in relation to those assets.

Floating Charges

A type of legal security placed over floating assets of a company (i.e. stock, vehicles or equipment).

Fraudulent Trading

Where a company has conducted business with deliberate intent to defraud customers or creditors. It is a criminal offence for those involved and can result in personal liability for the company’s losses.

I

Individual Voluntary Arrangement (IVA)

A more informal insolvency procedure where an individual proposes a plan including a schedule of repayment of debt to his or her creditors.

Insolvency

Defined as the inability to pay debts as and when they fall due.

Insolvency Acts

The primary legislation regulating insolvency affairs in England and Wales.

Insolvent Liquidation

When a company goes into compulsory or creditors’ voluntary liquidation at a time when it has insufficient assets to pay its creditors.

Insolvency Partnership Order 1994 (IPO)

The legislation in England and Wales that sets out the procedures and regulations for insolvent partnerships.

Insolvency Practitioner (IP)

See licensed insolvency practitioner.

Insolvency Rules

The secondary legislation that provides the detailed working procedures that underpin the Insolvency Acts.

Interim Order

A procedure that is granted upon application by the court, which provide protection over the assets of an individual whilst a voluntary arrangement proposed to creditors. It prevents bankruptcy or other legal proceedings taking place throughout the duration of the order.

L

Law of Property Act 1925

Relates to the law of property transactions. Provides the statutory powers required by receivers over fixed charge assets.

Licensed Insolvency Practitioner (IP)

A licensed individual who is able to act as office holder in all formal and informal insolvency procedures. Regulation may be granted through a number of professional regulatory organisations, including Accountancy bodies, The Law Society, Insolvency Practitioners Association or Department for Business Enterprise and Regulatory Reform. Persons who are not licensed insolvency practitioners will not be able to offer the full range of solutions to their clients.

Liquidation

Also commonly referred to as ‘winding up’, liquidation refers to a range of formal insolvency procedures that close down a company and, where possible, repay everybody through distribution of its assets to entitled parties, including shareholders.

Liquidation Committee

A committee of creditors who receive information from, and can agree certain actions proposed by, the liquidator.

Liquidator

The term used for the Official Receiver or licensed insolvency practitioner who has been appointed to wind up the company’s affairs.

LPA Receiver

Law of Property Act 1925 Receiver: a person appointed by a mortgager that holds a fixed charge over a property where the debtor is in default of payments. The LPA receiver will take control of the property usually with a view to selling it and/or collecting rental income for the lender.

M

Members

More commonly referred to as shareholders. People who own shares in a limited company.

Members’ Voluntary Liquidation (MVL)

A formal insolvency procedure where the shareholders of a solvent company appoint a liquidator to realise the company’s assets and pay all creditors, with interest, within 12 months.

Moratorium

The term for the protection of a company and its assets from any action by its creditors.

N

Nominee

A licensed insolvency practitioner who assists in the preparation of a proposal for an individual, partnership or company voluntary arrangement and convenes the meeting of creditors and usually becomes supervisor of the arrangement.

O

Office Holder

The licensed insolvency practitioner who is administrative receiver, administrator, liquidator, provisional liquidator, supervisor of a voluntary arrangement or trustee in a bankruptcy.

Official Receiver (OR)

An officer of the court who is also a member of the Insolvency Service, who is appointed initially in relation to bankruptcies and compulsory liquidations.

P

Partnership Voluntary Arrangement (PVA)

A voluntary arrangement procedure tailored for Partnerships under the Insolvent Partnerships Order 1994.

Petition

The document that is submitted to court as part of an application for compulsory liquidation or bankruptcy.

Phoenixism

The often repeated re-establishment of a business following liquidation of its predecessor; commonly under a similar name.

Preference

A payment or transaction to a creditor which deliberately pays them before other creditors.

Preferential Creditors

Employee related claims who have priority over distribution of funds in advance of floating charge and unsecured creditors for the statutory protected amounts for arrears of wages and holiday pay.

Proof of Debt

Documentary evidence provided by a creditor to the licensed insolvency practitioner, in compulsory liquidations and bankruptcy, on the amount of debt owed.

Provisional Liquidator

The licensed insolvency practitioner appointed by the court to safeguard the assets of a company between the petition for a winding up order being submitted and a liquidator being appointed – if the court is satisfied that the assets are at risk.

Proxy

A document which is submitted by shareholders or creditors notifying the licensed insolvency practitioner of their attendance at the creditors meeting, or indicating the nomination of a representative and their voting instructions.

Proxy Form

See proxy.

Proxy Holder

The person who represents the creditor at the meeting.

R

Retention of Title (ROT)

A provision under a supplier’s contract that retains ownership of goods until they have been paid for in full.

S

Scheme of Arrangement

The details of an agreement between a company and its creditors and members usually regarding the reorganisation of the company. Typically applied for insurance companies.

Secured Creditor

A creditor who holds a form of charge or debenture over specific assets of a debtor. A secured creditor would usually get paid first out of the proceeds of a sale of such assets.

Security

A form of charge or loan agreement taken over specific assets to ensure payment of a debt. Most common form of such an agreement is a debenture over fixed assets such as property, leasing companies or suppliers who hold retention of title.

Shadow Director

A person who is not formally appointed as a director of the company but in essence is a person whose instructions are acted on by directors of the company.

Shareholders

Sometimes referred to as members. People who own shares in a limited company.

Statement of Affairs

Document completed by the company’s directors, detailing all company assets, liabilities and the names and addresses of creditors. It must be verified by Affidavit.

Statutory Demand

A formal notice issued for repayment of a debt exceeding £750. Payment of which must be received within 21 days otherwise bankruptcy or compulsory liquidation proceedings may be commenced. If disputed, an application to set aside the debt must be submitted within 18 days of service.

Supervisor (of CVA, PVA or IVA)

A licensed insolvency practitioner appointed by creditors to supervise the progression of the approved voluntary arrangement.

T

Transaction at an undervalue

A gift or sale of assets under current market value usually for the benefit of the recipient. These transactions can be challenged under certain circumstances by an administrator, liquidator or trustee of a bankruptcy.

Trustee

A term used in the context of English and Welsh insolvency law for a licensed insolvency practitioner appointed over an individual in bankruptcy.

U

Unsecured Creditor

A creditor who does not hold any security on assets of the individual or company. Generally, the last in the queue for payment (but before shareholders).

V

VAT bad debt relief

The VAT relief obtained on unpaid debt after six months.

Voluntary Arrangement

A more informal insolvency procedure where an individual or company proposes a plan including a schedule of repayment of debt to creditors and/or shareholders.

Voluntary Liquidation

A formal insolvency procedure where a company’s assets are sold to pay creditors in part or in full, depending on the solvency of the business and the process chosen. See also Creditors’ Voluntary Liquidation and Members’ Voluntary Liquidation.

W

Winding Up

Also known as liquidation. This term refers to a range of formal insolvency procedures that close down a company and, where possible, repay everybody through distribution of its assets to entitled parties, including shareholders.

Winding Up Order

A court order for a company to be placed into compulsory liquidation.

Winding up Petition

A formal request made to the court seeking an order that a company be placed into compulsory liquidation.

Wrongful Trading

This is applied in circumstances where a director continues to allow the company to trade at a loss when they ought to have known that it was insolvent and therefore would have subsequently gone into insolvent liquidation.

The information presented is for information purposes only. The information is not, and is not intended to, amount to professional advice and should not be applied to specific circumstances. No responsibility for its accurateness and correctness, or for any consequences of relying on it, is assumed by Augusta Kent Limited. We strongly advise that you contact us or any other licensed insolvency practitioner for specific, personal advice.