A corporate process where an administrator is appointed to take control of a company, with a view to keeping it trading so creditors can receive some of the monies owed to them. This can be started by a court order, certain creditors, or on a voluntary basis by company directors.
A Court order putting an administrator in charge of a company.
A procedure where a creditor with security against all (or almost all) of a company’s assets appoints an Insolvency Practitioner to get those assets back.
A licensed insolvency practitioner, appointed to run a company on behalf of its creditors.
A court order removing someone from the bankruptcy register, and deleting all records of the bankruptcy – for example where someone should never have been made bankrupt, or if they are now able to pay all their debts in full.
When the total assets of a person or business are worth less than their debts.
The legal status of a person who has been declared bankrupt by court order, officially declaring they are unable to pay their creditors. This is usually voluntary, but can be enforced by creditors trying to reclaim their assets. In the UK, bankruptcy can only apply to individuals, and should not be confused with the American “Chapter eleven bankruptcy”, used by insolvent business to claim protection from creditors.
A professional with the combination of skills and qualifications to help rescue insolvent companies and prevent liquidation. Sometimes applied to insolvency solicitors who are also qualified insolvency practitioners, since they are able to both advise and act on the full range of legal and accountancy options available.
When a debtor is unable to meet their payments on their agreed due date. This can sometimes be solved by re-negotiation with creditors, who would often rather receive full payment a little late, then little or nothing now.
An official, legally binding agreement between an insolvent company and its creditors, setting out a schedule for payment.
A procedure, enforced by a court order, where a company or partnership is liquidated on an involuntary basis.
A legal judgment, ordering a debtor to pay an amount of money that is overdue, and leaving an official record as a warning to future creditors. If a debtor fails to comply with their CCJ, the court can send a bailiff to recover property, issue an Attachment of Earnings Order to deduct money direct from their wages or use a Third Party Debt Order to obtain money from others holding money on the debtor’s behalf (usually a bank).
A company or person who is owed money.
The Debt Management Scheme (DMS) is a route to help individuals with relatively low-level debts, subject to certain conditions. The debtor works with an authorised company to draw up a Debt Management Plan: an agreement setting out a schedule of payments to creditors.
A voluntary alternative to bankruptcy for individuals with debts and assets under a certain level. The forms can be completed without the expense of solicitors and IPs, and can provide relief from creditors and discharge from debtors after a year.
A court order, following an application to the Secretary of State under the Company Directors Disqualification Act 1986, preventing an individual from being a director or directly concerned in controlling, managing or promoting a company for as much as fifteen years. Usually sought against directors of companies defaulting on substantial debts or whose conduct makes them unfit to run a company.
A relatively new procedure – not widely used – after bankruptcy, where the Official Receiver can oversee an IVA, having the bankruptcy annulled.
A legally binding agreement, imposed by the courts, between an individual person and their creditors; this usually sets out a repayment schedule of as much as five years.
A situation where a person or business is unable to pay their debts.
The legal framework for insolvency issues in the UK, covering both individuals and businesses. It sets out the rules for personal bankruptcy, individual voluntary arrangements and administration orders for companies. Parts of the act were updated by the Enterprise Act 2002, which introduced new “out of court” options.
Insolvency practitioners are professionals who are officially licensed to advise and act in a range of insolvency issues. IPs are often accountants, however the qualification is occasionally pursued by specialist insolvency lawyers, such as Martyn Evans of brains solicitors, creating a convenient and effective “one stop shop” for those seeking fast action and the widest range of insolvency options.
Another word for a debt owed to a creditor.
A process where an company ceases trading, and its assets are sold off to pay off some of its debts. Liquidations can be compulsory or voluntary.
The person appointed to oversee the liquidation process and distribute funds to creditors or members if company solvent (Members Voluntary Liguidation). Liquidators must be either a licensed Insolvency Practitioner or Official Receiver.
A civil servant, working for the Insolvency Service, whose role involves dealing with bankruptcies and compulsory company liquidations and investigations.
Actions taken to reclaim funds paid to a creditor by an insolvent person or business, unfairly putting them ahead of other creditors. For example if a company, about to enter liquidation, spent the last of its money repaying a particular creditor in full, in the knowledge that this would mean other, less favoured creditors would receive nothing. Occasionally, creditors who have received payment in good faith face problems when their former debtor then becomes insolvent, and action is taken to claw back those funds – not least if they have since been spent. In such circumstances, it would be wise to contact a insolvency solicitor for specialist advice, and quickly.
A process where an individual normally an Insolvency Practitioner is appointed to reclaim funds on behalf of creditors who have security against specific, named assets of a company (buildings, land, etc). The term is often confused with “administrative receivership”, which realises assets on behalf of debenture holders with a floating charge over the company's assets.
A term used under Scottish bankruptcy law, to describe the courts seizing a bankrupt’s estate to pay creditors.
A more straightforward alternative to IVAs, for people whose total debts are within a certain limit. It’s simpler because it can’t be modified.
An official demand from a creditor to pay an undisputed debt of over £750 within 21 days, or face more serious legal proceedings. Often a very clear wake-up call to businesses that they may have full-blown insolvency issues and should approach an IP. Given the time limit, speed of response is crucial.
Where an administrator continues keeps a company trading in its usual business, as a viable route to repay its debts.
A company or partnership liquidation that is not started by a court order. This can be either a creditors’ voluntary liquidation where company is insolvent or a members’ voluntary liquidation, when the company can pay off all its debts with some money to spare (also called solvent liquidation).
The court order forcing a company to cease trading and undergo compulsory liquidation (hence the saying that a business is “being wound up”) – sometimes the result of a legal winding up petition by one or more creditors, who believe that the best way to receive payment is to liquidate the business. Occasionally, such orders are made wrongfully, or petitions are made by a creditor out of spite, and can be opposed and even overturned by a skilled insolvency solicitor.
Offices at:
29 Lemon Street, Truro, Cornwall TR1 2LS | Tel. 01872 276363 | Fax 01872 276364
Sydney House, 44 South Street, St Austell, Cornwall PL25 5BN
Tel. 01726 68111 | Fax 01726 61433
email: info@brainssolicitors.co.uk
brains insolvency is a trading name of brains solicitors
regulated by the Solicitors Regulation Authority
Martyn J Evans is authorised to act as a Licensed Insolvency
Practitioner by the Solicitors Regulation Authority (No. 134695)