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Note: The definitions and explanations are not intended to be exhaustive summaries of the law. If you require assistance with any insolvency related matter, The Nortons Group is available to advise you.

Administration Order - Contingent liability

Administration Order

1. 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. County Court process permitting an individual with modest debts to pay off by instalments.

Administrative Receiver

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. Sometimes abbreviated to receiver.

Administrative Receivership

The term applied to the company over which the administrative receiver has been appointed. Commonly abbreviated to receivership.

Administrator

A licensed insolvency practitioner appointed by the Court under an administration order to achieve the purposes set out in the order. The administrator must produce a plan, known as his proposals, for approval by the creditors to achieve this.

Associate

Defined by s 435 of the Insolvency Act 1986. 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 (see also connected persons).

Bankrupt

A bankrupt is an individual against whom the Court has made a bankruptcy order. The order signifies that the individual is unable to pay their debts. Their property vests in their Trustee in Bankruptcy who will realise it for distribution amongst the creditors.

Bankruptcy

The process of dealing with the estate of a bankrupt.

Bond Insurance

Insurance cover which a licensed insolvency practitioner must hold to cover the value of the assets of an insolvent individual or company which are under his control.

Break-up Sale

Dismantling of a business. Trading ceases and the assets are sold off piecemeal.

Charge

A right given to a creditor to have a designated asset of the debtor appropriated to the discharge of the indebtedness, but not involving any transfer either of possession or ownership.

Charging Order

Court Order placing restrictions on the disposal of certain assets, such as property or securities, giving priority of payment over other creditors.

Company Directors Disqualification Act (1986)

Legislation setting out the grounds for disqualification of persons from being directors or otherwise concerned with a company's affairs.

Company Voluntary Arrangement (CVA)

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 licensed insolvency practitioner who acts as supervisor.

Composition

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.

Compulsory Liquidation

A liquidation ordered by the Court as a result of a petition presented to the Court, usually by a creditor. This is the only method by which a creditor can force the liquidation of a debtor company.

Connected Persons

Directors or shadow directors and their associates, and associates of a company. S249 of The Insolvency Act 1986 (see also associates)

Contingent liability

A liability which may is contingent upon a future event.