[31-10-2003] INSOLVENCY TERMS - WHAT DO THEY MEAN?
The following list provides a brief explanation of some of the terms you may come across in insolvency proceedings. Please note that this glossary is for general guidance only. Many of the terms have a specific technical meaning in certain contexts, which may not be covered here.
Administrative receiver
IP appointed in an administrative receivership. In this case the IP is often referred to as the "receiver".
Administrator
IP appointed by the High Court under an administration order.
Annulment
The repeal of a bankruptcy order by the High Court.
Charge
Right taken over property by a creditor to protect against default in repayment of a loan (such as a mortgage).
Creditor
Someone to whom a debt is owed.
Debenture
Document in writing, usually under seal, issued as evidence of a debt and/or granting security for a loan of a fixed sum at interest. The term is often used in relation to loans (usually from banks) secured by charges, including floating charges, over companies' assets.
Debtor
Someone who owes a debt.
Deed of Arrangement
Arrangement (governed by the Insolvency (NI) Order 1989) proposed by the debtor for payments to his or her creditors. It is occasionally used instead of an individual voluntary arrangement, particularly where creditors already agree to the terms of the arrangement and are not likely to take other action to recover their debt.
Discharge
Process that frees a bankrupt from the restrictions of bankruptcy and releases him or her from most bankruptcy debts.
Dividend
Sum distributed to each creditor in insolvencies.
Fixed Charge
Charge held over specific assets. The debtor cannot sell the assets without gaining the consent of the secured creditor or repaying the amount secured by the charge.
Floating Charge
A charge held over general assets of a company. The assets may change (such as stock) and the company can use the assets without the consent of the secured creditor unless the charge "crystallises" (becomes a fixed charge). Crystallisation occurs on the appointment of a receiver, on the commencement of winding up or as otherwise provided for in the document creating the charge.
Interim Order
An order of the High Court protecting a debtor from proceedings for a limited period to allow him to make a proposal to his creditors for a voluntary arrangement.
Interim Receiver
The High Court may appoint the OR to act as interim receiver of an individual's property (usually to protect and secure it), after the presentation of the bankruptcy petition but before a bankruptcy order is made.
Liquidation (winding up)
Applies to companies or partnerships. It involves the realisation and distribution of the assets and usually the closing down of the business. There are three types of liquidation - compulsory, creditors' voluntary and members' voluntary.
Liquidator
OR/IP appointed to administer the liquidation of a company or partnership.
Member (of a company)
A person who has agreed to be, and is registered as, a member, eg a shareholder of a limited company.
Nominee
IP who carries out the preparatory work for a voluntary arrangement, before its implementation.
Preferential Creditor
Creditor entitled to receive payments in priority over other unsecured creditors. These creditors include certain government departments, occupational pension schemes and employees.
Proof of Debt
Statutory form completed by a creditor to state how much is claimed. The form is supplied by the trustee or liquidator.
Provisional Liquidator
OR/IP appointed to preserve a company's assets pending the hearing of a winding-up petition.
Proxy Form
Form, which must be completed if a creditor wishes someone else to represent him or her at a creditors' meeting and vote on his or her behalf.
Receiver
Commonly used name for an administrative receiver. The term can also mean a person appointed by the High Court or under a charge to receive the rents and profits of property.
Receiver and Manager
When a bankruptcy order is made, the OR becomes receiver and manager to protect the bankrupt's estate. This happens before the OR becomes trustee or before an IP is appointed in his place.
Receivership
A company in administrative receivership is often said to be "in receivership".
Release
The process whereby the OR/IP is freed from liabilities as trustee/liquidator or administrator.
Secured Creditor
Creditor who holds security, such as a mortgage, over a person's assets for money owed.
Statement of Affairs
Document completed by a bankrupt or company officer, stating the assets and giving details of debtors and creditors.
Summary Administration
Where a bankrupt has filed his or her own petition and the debts are less than the small bankruptcy level (currently £20,000), the High Court can issue a certificate for the summary administration of the estate. In such cases the OR is not obliged to investigate the bankrupt's affairs and the bankrupt may be discharged after two years.
Supervisor
IP appointed to supervise the carrying out of an individual or company voluntary arrangement.
Trustee
Person who holds property in trust for another. In bankruptcies the OR (as trustee in bankruptcy) or IP holds the property of the bankrupt in trust for creditors and is referred to as the trustee.
Unsecured Creditor
Creditor who does not hold security for money owed. Some unsecured creditors may also be preferential creditors.
Voluntary Arrangement
A means whereby the High Court may allow an individual debtor to put in place a proposal to pay his creditors under the supervision of an IP acting as supervisor.
Voluntary Liquidation
Method of liquidation not involving the High Court or the OR. There are two types of voluntary liquidation - members' voluntary liquidation for solvent companies or creditors' voluntary liquidation for insolvent companies
Winding-Up Order
Order of the High Court for the compulsory winding-up or liquidation of a company or partnership.
