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1. 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, allow a reorganisation or ensure the most advantageous realisation of its assets, whilst protecting it from action by its creditors.
2. The administration of the insolvent estate of a deceased debtor.
3. A County Court process permitting an individual with modest debts to pay off by instalments. No licensed insolvency practitioner is involved.
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A licensed insolvency practitioner 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. This is sometimes abbreviated to receiver.
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The term applied when a person is appointed as an administrative receiver. Commonly abbreviated to receivership.
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A licensed insolvency practitioner appointed by the Court under an administration order to achieve the proposal 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.
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A specialist remedy available to a secured creditor 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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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.
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Bankruptcy is the process of dealing with the estate of a bankrupt.
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Insurance cover, to protect the uncharged assets of an estate needed by a person who acts as a licensed insolvency practitioner.
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Dismantling of a business. Trading ceases and the assets are sold off piece mental.
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A right given to the creditor to have a designated asset of the debtor appropriated to the discharge of the debt, but not involving any transfer either of possession or ownership.
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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 is on the disqualification of persons from being directors or otherwise concerned with a company's affairs.
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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 limited involvement by the Court and the scheme is under the control of a supervisor.
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An agreement between a 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.
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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's company.
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Directors or shadow directors and their associates, and associates of a company.
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Report of the Insolvency Law Review Committee, chaired by Sir Kenneth Cork, upon which the Insolvency Act 1986 is substantially based (Command Paper 855,1982).
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A person, not necessarily a licensed insolvency practitioner, appointed to take charge of assets, usually when they are subject to some legal dispute. This is not strictly an insolvency process but 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 interest of all creditors in supervising the activities of an administrator or trustee in bankruptcy, or in 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.
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A document, which either acknowledges, or creates a debt. The expression is commonly used to denote a document conferencing a fixed and floating charge over all the assets and undertakings of a company.
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A method for an individual (not a company) to come to terms with creditors outside formal bankruptcy. The procedure is governed by the Deeds of Arrangement Act 1914 and is now almost completely replaced by voluntary arrangements.
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Constituted under the Banking Act 1987 to administer the Deposit Protection Fund. If an authorised institution becomes subject to liquidation or administration proceedings, the Board will pay those designated as "protected depositors" compensation to the extent of 75 per cent of the first £20,000 of their total deposits.
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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 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. This transaction may be challenged either 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 from 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 the debt, usually by appointing an administrative receiver, and obtain the net proceeds of sale subject to the prior claims of the preferential creditors.
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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 licensed 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.
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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.
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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.
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Primary legislation governing insolvency law and practice. Nevertheless, many other statutes and statutory instruments are also relevant.
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An account maintained at the Bank of England by the Department of Trade and Industry, through which funds must be passed in liquidations and bankruptcies.
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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.
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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.
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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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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 Securities and Investments Board to give individual investors up to £48,000 protection if an authorised investment business collapses.
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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. This is common in the case of the failure of a property developer, whose borrowings will largely be secured on specific properties.
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Person licensed by one of the Charted Accountancy bodies, the Law Societies, The Insolvency Practitioners' Association or the Department of Trade. The only person who may act as an office holder is an insolvency. Persons claiming to be insolvency practitioners, but who do not hold a license, 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 bodied listed in Section 12: Useful contacts.
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Right to retain possession of assets or documents until the settlement of a debt.
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Liquidation is the process whereby a company has its assets realised and distributed to satisfy, insofaras 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.
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Committee of creditors who receive information from the liquidator and sanction some of his actions (c.f. Creditors' Committee).
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Licensed insolvency practitioner appointed to wind-up a company.
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Court Order preventing the disposal of assets.
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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.
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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 or land or other property by way of security, upon the express or implied condition that the asset shall be re-conveyed to the debtor when the sum secured has been paid.
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Licensed insolvency practitioner nominated in a proposal for an individual or corporate voluntary arrangement to act as supervisor to the arrangement.
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A liquidator, provisional liquidator, administrator, administrative receiver, supervisor of a voluntary arrangement, or trustee in bankruptcy.
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Officer to the Court, civil servant, member of the Department of Trade Insolvency Service, the person who deals with bankruptcies and compulsory liquidations.Onerous Property The term onerous property in the context of a liquidation or bankruptcy, applies to unprofitable contracts and to property that is un-saleable or not easily saleable, or that might give rise to a continuing liability. In bankruptcy, such property can be disclaimed, either by a liquidator or a trustee.
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The term used to describe the company voluntary arrangement procedure as applied to partnerships under the provisions of The Insolvent Partnerships Order 1994. Petition A written application to the Court for relief or remedy.
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An act, which established the 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 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 two years, where the creditor is a connected person, or six months, in other cases, of the insolvency.
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This term is defined in Schedule 6 of The Insolvency Act 1986. They have priority when funds are distributed either by a liquidator, administrative receiver or a trustee in bankruptcy.
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Document submitted by a creditor to the licensed insolvency practitioner giving evidence of the amount of the debt, only used in compulsory liquidations.
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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.
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Document whereby a creditor authorises another person to represent him at a meeting of creditors. The proxy may be a general proxy, giving the proxy holder discretion as to how he votes, or a special proxy requiring him to vote as directed by the creditor. A corporate body can be represented by a proxy.
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Person who attends a meeting held on behalf of someone else.
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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. Receivership The general term applied when a person is appointed as a receiver or administrative receiver.
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An organisation approved by the President of the Board of Trade as being able to authorise its members to act as licensed insolvency practitioners.
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The commencement date of the insolvency proceedings.
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This is 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. It is a complex and continually evolving area of law.
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A term normally used to describe 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 the 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.
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A creditor with specific rights over some, or all, of a debtor's assets. A secured creditor gets paid first out of the proceeds of sale of the security.
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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 of a property.
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A person who is not formally appointed as a director, but in accordance with those 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. Special Manager 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 a licensed insolvency practitioner. 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.
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The licensed insolvency practitioner appointed by creditors to supervise the way in which an approved voluntary arrangement is put into effect.
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A transaction at an under value can be described either as a gift or a transaction in which the consideration received is significantly less than that given. In certain circumstances, this transaction can be challenged either by an administrator, a liquidator or a trustee in bankruptcy.
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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 debtor).
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Strictly speaking, 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 be unsecured. In any event, the last in the queue, apart form the shareholders.
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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 where debt is 6 months old at the relevant date.
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See Individual Voluntary Arrangements (IVA) and Company Voluntary Arrangement (CVA).
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See creditors' voluntary liquidation and members' voluntary liquidation.
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Order made by the Court for a company to be placed in compulsory liquidation.
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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 asset.
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