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Glossary of Terms


This is the name of the process following the making of an Administration Order by a court. An Administration is a process usually instigated by the directors, the company itself or a creditor. Upon the making of an Administration Order a moratorium is granted protecting the company from any legal actions and will be placed under the day-to-day control and management of an Administrator. Any creditor with a Floating Charge must also be given the opportunity to decide whether to appoint their own Administrator or an Administrative Receiver before the order is made.

Administration Order

An Administration Order is a court procedure that places the company under the control of a Licensed Insolvency Practitioner and the protection of the court to achieve one or more specific purposes. It is usually applied for by the directors of an insolvent company, the company itself or a creditor. When the order is made, the company is then managed by the Administrator who will try to save the company or the business, or achieve a better result for creditors than Liquidation.

Administrative Receiver

An Administrative Receiver is a Licensed Insolvency Practitioner appointed by the holder of a Floating Charge Debenture created before 15 September 2003, covering the whole, or substantially the whole, of a company’s property. They can, and often do continue the company’s business, whilst trying to sell it and other assets to repay Secured Creditors and Preferential Creditors.

An Administrative Receiver has no authority to deal with the claims of Unsecured Creditors. If sufficient funds become available for distribution, they are dealt with by a Liquidator appointed separately. Administrative Receivers cannot be appointed in respect of Debentures dated after 15th September 2003.

Administrative Receivership

An Administrative Receivership is an insolvency process following the appointment of an Administrative Receiver by a bank or other lender. A higher price is usually achieved from the sale of the assets than if the company’s assets were disposed of in piecemeal.


This is a Licensed Insolvency Practitioner that is appointed where an Administration Order has been made by the court. The Administrator takes control of the affairs of the insolvent company with the purpose of achieving the objective(s) set out in the Administration Order.


This is the term for an individual who is subject to a Bankruptcy Order granted by the court. The order demonstrates that the individual is unable to pay his or her debts and any property that existed at the time the Bankruptcy Order was made, vests in the Trustee to be realised for the benefit of the Bankrupt’s creditors.


Following the making of a Bankruptcy Order by the court, the assets of the Bankrupt individual immediately fall under the control of a Trustee. At the start of the process the Official Receiver is appointed as the Trustee to administer the bankruptcy estate. However, in certain circumstances, a Licensed Insolvency Practitioner can be subsequently appointed as the Trustee. This is usually based on the wishes of the majority of creditors.

Any capital held in the form of property, including a house, must be realised. The law does, however, allow a period of time (typically between 9 – 12 months) for the Bankrupt person’s family to make alternative arrangements before it will order the property to be sold. The Bankrupt individual is usually allowed to keep furniture and other basic domestic requirements, and in certain circumstances a low value car.

Bankruptcy Order

This is an order of the court to declare an individual bankrupt. This could be following the petition of a creditor, the debtor or a Supervisor of a failed Individual Voluntary Arrangement on the grounds of insolvency, or by the Secretary of State for Business, Innovation and Skills.

Company Voluntary Arrangement (CVA)

A legal agreement between an insolvent company and its creditors which sets out how a company is going to repay the money it owes, how much it will repay and over what period. A Company Voluntary Arrangement can include the planning of a corporate re-organisation involving delayed or reduced payments of debt, capital restructuring or an orderly disposal of assets. A proposal for a Company Voluntary Arrangement is presented to creditors and shareholders by its directors having been assisted by a Nominee. There is limited court involvement and the scheme is supervised by a Supervisor.

Compulsory Liquidation

Also called a compulsory winding-up, a Compulsory Liquidation is a Liquidation of a company when a court grants a Winding-up Order. The process commences by the presentation to a court of a Winding-up Petition usually by a creditor who has not been paid money it is owed by the company. The Winding-up Petition can also be presented by the company, its director(s) or its shareholder(s). A Winding-up Petition can also be presented by the Secretary of State for Business, Innovation and Skills on the grounds of public interest.

The court initially refers the case to the Official Receiver. If the assets are likely to cover the administrative costs, the Official Receiver may ask creditors to nominate a Liquidator other than him or herself, otherwise he or she will remain in office. In some cases the Department of Business, Innovation and Skills may use its power to appoint a Liquidator as soon as the Winding-up Order is made. In any event, the Official Receiver retains responsibility for investigating the conduct of directors and other officers.

Creditors’ Voluntary Liquidation (CVL)

This is a process which is used when a company is insolvent and the directors have recognised that the company should cease to trade. It is a director led process, with the directors commencing the process by convening a meeting of shareholders to place the company into Liquidation voluntarily.

At the shareholders’ meeting, the shareholders pass a Special Resolution for the company to enter into Creditors’ Voluntary Liquidation and a Licensed Insolvency Practitioner is appointed as the Liquidator. A physical meeting of the company’s creditors is no longer held and instead the creditors are engaged through a qualifying decision process. This can either be way of deemed consent or by holding a virtual meeting. Whichever route is chosen, the outcome of the decision process must still be concluded within 14 days of the shareholders’ meeting, although in practice normally occur on the same day.

Once the company is in Creditors’ Voluntary Liquidation, the powers of the directors’ cease and control of the company is passed to the Liquidator.


A debenture is a document setting out the terms of a loan, usually to a company. It may be secured on part or all of a company’s assets, and often comprises of a Fixed Charge a Floating Charge, or a combination of both. The lender is referred to as the debenture holder and is a Secured Creditor.

Fixed Charge

This is a form of security granted over specific assets, preventing a company or an individual from dealing with those assets without the consent of the Secured Creditor. It gives the Secured Creditor a first claim to the proceeds of sale of the assets over which the charge falls and the creditor can usually appoint a Receiver to realise the assets in the event of default. A Fixed Charge holder will rank before Floating Charge creditors, Preferential Creditors and Unsecured Creditors.

Floating Charge

This is a form of security over general assets of a company which can change from time to time as part of the normal activity of a business. The company continues to use the assets until a default event occurs. If this happens, the holder of a Floating Charge will usually appoint an Administrative Receiver or an Administrator (depending on the date of the charge) to realise the assets of the company to recover the debt. A Floating Charge holder will rank for dividend purposes after the holder of a Fixed Charge and Preferential Creditors but before Unsecured Creditors.

Depending on the date on which the Floating Charge was created, there may be a need to calculate an amount that is known as the Prescribed Part. This is a calculated value based upon asset realisations that by-pass the Floating Charge holder and is available to Unsecured Creditors.

Going Concern

A Going Concern is the basis on which a Licensed Insolvency Practitioner will attempt to sell a business out of an insolvency process. Effectively this means that the business will continue, jobs are saved, and a higher price is usually achieved.

Individual Voluntary Arrangement (IVA)

An IVA is a legal agreement between an individual and their creditors which sets out how the individual is going to repay the money he or she owes, how much will be repaid and over what period. It will always ensure that creditors receive an enhanced return compared with the individual entering into bankruptcy proceedings.

An IVA is an extremely flexible procedure and can be proposed by individuals who are already subject to bankruptcy proceedings. It enables the individual to go about their daily business in a less restricted way than under Bankruptcy.

Licensed Insolvency Practitioner

This is a person licensed by one of the Recognised Professional Bodies who are authorised by the Department of Business, Innovation and Skills. Only a Licensed Insolvency Practitioner can be appointed to act in insolvency proceedings.


This is the name of the process by which a company is brought to an end. There are three types of Liquidation: Compulsory Liquidation, Members’ Voluntary Liquidation and Creditors’ Voluntary Liquidation.


A Licensed Insolvency Practitioner that is appointed to wind-up a company.

Members’ Voluntary Liquidation (MVL)

An MVL is a procedure for winding up a company which is solvent, i.e. that the company has sufficient assets to repay all known creditors in full, together with statutory interest within 12 months of the commencement of the MVL. Reasons for winding up a solvent company include:

• providing an exit route for private company shareholders to enable them to realise their investment.
• where a company is dormant or its purposes have been fulfilled as part of a reorganisation scheme.
• Simply wishing to retire and to exit the business as tax efficiently as possible.

The procedure requires a Statutory Declaration of Solvency to be completed by the directors of the company. The Liquidation commences when the shareholders pass a special resolution at a shareholders’ meeting. Although the MVL procedure is only available for solvent companies, the law requires that the Liquidator is a Licensed Insolvency Practitioner.


A Licensed Insolvency Practitioner appointed by a company or an individual to formally advise the directors of a company or an individual during the period leading up to the creditors’ approval of the terms for a Company Voluntary Arrangement or an Individual Voluntary Arrangement.

Official Receiver

An Official Receiver is an officer of the court who is a civil servant and an officer of The Insolvency Service, an executive agency of the Department of Business, Innovation and Skills.

Preferential Creditor

A class of creditor who benefits from a statutory priority over creditors holding a Floating Charge and Unsecured Creditors. Preferential Creditors consist predominantly of employees’ claims for arrears of wages, accrued holiday pay and in some circumstances, unpaid pension contributions. There are limits that apply to the amount of money an employee can claim preferentially, with any balance forming an unsecured claim against the company or an individual.

Prescribed Part

The Prescribed Part was introduced by section 176A of The Insolvency Act 1986 (as amended). It is a share of the assets of a company subject to a Qualifying Floating Charge which is reserved for distribution to Unsecured Creditors in priority to a Qualifying Floating Charge creditor in an Administration or Liquidation.

Qualifying Floating Charge

A Floating Charge can also be a Qualifying Floating Charge if it is expressed to be one, or if the security document purports to give the holder power to appoint an Administrator or Administrative Receiver. It relates to the whole, or substantially the whole of the company’s property.


An individual appointed by a Secured Creditor under the terms of a Mortgage or Debenture in respect of specific assets of a company. A Receiver need not be a Licensed Insolvency Practitioner.

Secured Creditor

This is a class of creditor who benefits from holding security over part or all of a company’s or individual’s assets.


This is a Licensed Insolvency Practitioner appointed by creditors in either a CVA or an IVA to implement the terms of the Arrangement as approved by creditors.


Upon the making of a Bankruptcy Order, in the early stages the Official Receiver handles the bankruptcy estate. They may also be the Trustee, however, there are certain circumstances whereby a Licensed Insolvency Practitioner can become the Trustee to administer the estate of a Bankrupt. This can either be at the request of the Official Receiver or by the creditors, subject to the specific criteria being met.

Unsecured Creditor

This is a class of creditor who does not hold security and who has no preferential rights. An unsecured creditor ranks below Secured Creditors and Preferential Creditors, with the exception of when the Prescribed Part is applicable.

Winding-up Order

This is an order made by the court for a company to be placed in Compulsory Liquidation.

Winding-up Petition

A Winding-up petition is a petition presented to the court seeking an order that a company be put into Compulsory Liquidation by the court making a Winding-up Order.