Advice Centre

Administration – This is when a company is in financial difficulty and an administrator is called in to assess the viability of the company. The administration may result in:
• the company continuing as at present;
• new directors being found to turn the company around; or
• the company closing down and any assets being sold to pay off its debts.

Administrator – A licensed insolvency practitioner appointed by the court to take control of a company when it goes into administration.

Arrears – Arrears are debts and overdue amounts. If arrears are not paid off, the person or company the arrears are owed to can take legal action to recover the amount they are owed.

Asset – Something of value which a person or company owns and could sell to raise funds (for example, a house or a car).

Bankruptcy – An option a person can use if they cannot repay their debts, or if their debts exceed the value of their assets. If the person is declared bankrupt (after applying for bankruptcy themselves or creditors applying for them to be made bankrupt), an official receiver takes control of the person’s assets.

Creditor’s Petition – An application creditors can make to the court for their debtors (those who owe them money) to be made bankrupt.

Companies House – Companies House register all limited companies and public limited companies. They store information about companies and make it available to the public. Companies House also incorporate (form) and dissolve (break up) companies.

Company Voluntary Arrangement (CVA) – A CVA is used when the company is profitable and is believed to have the ability to trade profitably going forward but has historic debt and pressures from creditors holding it back. This includes HM Revenue and Custom debt, which may have built up. The company in a CVA will typically pay an amount of money that it can afford to pay from future trading against those debts and the remaining debt at the end of a successful CVA will be written off.

County Court Judgement (CCJ) – Creditors (those who are owed money) can apply for a county court judgement to recover a debt. If a county court judgement is made against a debtor(the person who owes the money), the court will order the debtor to pay the debt off within a set time.

Creditor – A company or person who is owed money for goods or services they have provided. In a company’s accounts, amounts owed to creditors are classed as liabilities.

Creditors’ Voluntary Liquidation (CVL) – A procedure that happens when shareholders and directors agree to place the business into liquidation because it can no longer pay its bills when they fall due.

Credit Rating – This is an estimate of a person’s or company’s financial situation. Banks and financial-service providers use credit ratings when deciding whether to provide credit. A person’s or company’s credit rating is based on repayments they have made in the past and any court judgements.

Debtor – A company or person who owes money for services they have received but not yet paid for. In a company’s accounts, amounts owed by debtors are classed as assets.

Directors – The people in a company who are responsible for running and managing it.

Dissolution – A legal process which breaks up a company that has not traded for at least three months.

Dividend -The part of the earnings of a corporation that is distributed to its shareholders. Usually paid quarterly
HM Revenue & Customs (HMRC) – The tax and customs authority that collects the taxes (for example, income tax and VAT) that pay for public services and state benefits.

Individual Voluntary Arrangement (IVA) – An agreement that a person (not a company) enters into with their creditors to pay off their personal debts over a set period of time. It is a formal debt solution approved by the court.

Insolvency Practitioner – A professional person (not a company) who is an expert in insolvency and is a member of and is licensed by the Insolvency Practitioners Association.

Insolvent – A term that is used when a company cannot pay or cover their debts (their liabilities) with the funds or assets they have (that is, their liabilities are greater than the value of the funds and assets they have).

Liability – Something that a person or company owes to another person or company.

Limited Company – A business that is seen as being legally separate from its directors and shareholders, meaning that they are not liable for any of the business’s actions. Limited companies are usually privately owned.

Limited Liability – A legal process that allows the shareholders of limited companies and public limited companies to limit their responsibilities. For example, so shareholders do not lose more than their investment in the business.

Liquidation – A process for bringing a company to an end. An insolvency practitioner is appointed to act as the liquidator. They sell all the company’s assets and distribute the proceeds to creditors. Any remaining amount goes to shareholders. The company is then struck off the register at Companies House.

Liquidator – When a company is in liquidation, an insolvency practitioner is appointed to be the liquidator. They are responsible for selling the company’s assets and distributing the proceeds to creditors.

Meeting of Creditors – The various insolvency procedures provide for the arranging of meetings of creditors in order for creditors to participate in the insolvency process.

Nominee – A licensed insolvency practitioner who helps to negotiate a deal with creditors as part of a proposal for a company voluntary arrangement or individual voluntary arrangement. The nominee deals with legal issues and matters such as chairing meetings with creditors and checking the debtor’s accounts and forecasts.

Partnership – A business with more than one director (partners).

Partnership Voluntary Arrangement (PVA) – This is a debt solution for partnerships that cannot pay their debts. It allows the partners to come to an arrangement to pay off part of their debt over a period of time.

Pay As You Earn (PAYE) – A system where employers take tax and National Insurance contributions from their employees’ wages and pay them to HM Revenue & Customs.

Shareholder – A person who has bought shares in a company or owns a percentage of a company. Shareholders have a say in how the company is managed and receive a share of the profits, in the form of dividends.

Sole trader – Type of business owned by an individual who is fully responsible for the company’s debts and completing any contracts undertaken.

Statement of Affairs – This is a summary of someone’s financial affairs. It sets out what thy own, the assets they have, their liabilities (debts) and their living expenses

Unsecured Creditor – A creditor who does not hold security in relation to the debtor.

Winding up Order – An order made by the court for a company to be placed into compulsory liquidation.