McLenan Corporate

Glossary of Terms


Administration is a process which places a company under the control of a licensed insolvency practitioner and the protection of the court. It can be commenced by the directors, floating charge holders or companies by filing a ‘Notice of Intention to Appoint’ or ‘Notice of Appointment’ at court, or in certain circumstances by making an application to the court. The purpose of administration is to save the company, or if that is not possible, to achieve a better result for creditors than in a liquidation. If neither of those is possible, the purpose of an administration is then to realise property to enable funds to be distributed to secured or preferential creditors.

Administration order

An administration order is a court order placing a company that is, or is likely to become, insolvent under the control of an administrator following an application by the company, its directors or a creditor. The purpose of the order is to preserve the company’s business and assets to allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action by its creditors.

Administrative receiver

Administrative receiver refers to the appointment of a receiver over the whole of a company’s assets by the holder of a floating charge to recover monies owed to the lender. The administrative receiver 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. Administrative receivership is increasingly rare, as it is only available where the security pre-dates 15 September 2003.


An administrator is a licensed insolvency practitioner appointed to manage the affairs of a company to achieve the purpose of administration set out in the Insolvency Act 1986.


A bankrupt is an individual against whom a bankruptcy order has been made by the court and who has not been discharged from bankruptcy.


Bankruptcy is the process of dealing with the estate of a bankrupt.

Bankruptcy order

A bankruptcy order is a court order making an individual bankrupt. The order signifies that the individual is unable to pay his/her debts and deprives him/her of his/her property, which is then realised for distribution amongst his/her creditors.


A bond refers to the insurance cover needed by a licensed insolvency practitioner when appointed to deal with the insolvency of a company. The cost of the bond is payable from the estate.

Charging order

A charging order is a court order placing restrictions on the disposal of certain assets, such as property or securities, given after judgment and gives priority of payment over other creditors.

Company voluntary arrangement (CVA)

A company voluntary arrangement is a legally binding agreement between a company and its creditors to repay some or all of its debt over a period of time.

Compulsory liquidation

A compulsory liquidation of a company is a liquidation ordered by the court. This type of liquidation applies where a creditor has petitioned the court for the winding-up of the company.

Court-appointed receiver

A court-appointed receiver is a person, who does not necessarily have to be a licensed insolvency practitioner, appointed to take charge of assets usually where they are subject to litigation and to preserve them pending the outcome of the case. This is not an insolvency process.

Creditors’ voluntary liquidation (CVL)

A creditors’ voluntary liquidation relates to an insolvent company. It is commenced by resolution of the shareholders, but is under the effective control of creditors, who can choose the liquidator.


Any person who owes money to another.


A debenture, broadly speaking, is a document stating the terms of a loan, usually to a company. Debentures may be secured on part or all of a company’s assets, or they may be unsecured. Where a company’s principal secured creditor is a bank, a debenture in favour of the bank is likely to create fixed and floating charges over all of the company’s assets.

Disqualification of directors

The disqualification of a director usually refers to a director found to have conducted the affairs on an insolvent company in an ‘unfit’ manner.  A director of a limited company can be disqualified if, during his term of office, a liquidator establishes sufficient evidence of ‘unfit’ conduct which leads to a prosecution by the Disqualification Unit of the Insolvency Service. As a result of disqualification, the individual is not allowed to hold any management position in a company for between 2 and 15 years and faces criminal sanctions and personal liability for the new company’s debts if they contravene the disqualification order. A disqualification undertaking given to avoid the court action has the same legal effect.


A company is dissolved when it is removed from the register at Companies House. It ceases to exist as a legal entity and any property which it still owns at the date of dissolution goes to the Crown as bona vacantia. It is possible to apply to the court to have a dissolved company restored to the register.

Fixed charge

A fixed charge is a form of security granted over specific assets, preventing the debtor from dealing with those assets without the consent of the secured creditor. Companies can create floating charges; individuals cannot.

Floating charge

A floating charge is a form of security granted to a creditor over general assets of a company which may change from time to time in the normal course of business (e.g. stock).

Fraudulent trading

Fraudulent trading refers to running a company with intent to defraud creditors. A liquidator can sue any person who is responsible for fraudulent trading and it is also a criminal offence.

Individual voluntary arrangement (IVA)

An individual voluntary arrangement is a procedure whereby the person comes to an arrangement with their creditors in how their debt will be put forward to creditors. Such a scheme requires the approval of 75% by value of the creditors who vote and is under control of a supervisor who must be an insolvency practitioner.


Insolvency is the state of not having enough assets to meet all debts, or being unable to pay debts as and when they are due. If a creditor can establish that an individual or company is insolvent, he or she will be able to present a winding-up petition.

Insolvency Act 1986

The Insolvency Act 1986 is the primary legislation governing insolvency law and practice. Many other statutes and statutory instruments are also relevant, but the Insolvency Act 1986 is the primary legislation.

IP (See Insolvency practitioner)

Insolvency practitioner (IP)

An insolvency practitioner is a person licensed by his/her recognised professional body to act as an officeholder in an insolvency proceeding. Only an insolvency practitioner may act as an office holder (i.e. liquidator, administrator, administrative receiver, nominee, supervisor, trustee in bankruptcy).

Interim order

An interim order refers to an individual who intends to propose a voluntary arrangement to his creditor. He or she may apply to the court for an interim order which, if granted, precludes bankruptcy and other legal proceedings whilst the order is in force.


Lien is the right to retain possession of assets or documents until settlement of a debt is made.


Liquidation is the procedure whereby a company has its assets realised and distributed to satisfy, insofar as it is able, its liabilities and to repay its shareholders. The term winding-up is also used.


A liquidator is a licensed insolvency practitioner appointed to wind up a company.

Members’ voluntary liquidation (MVL)

A members’ voluntary liquidation is a solvent liquidation of a company, where the shareholders appoint a liquidator to realise assets and settle all of the company’s debts.


A mortgage is a transfer of an interest in land or other property by way of security, redeemable upon performing the condition of paying a given sum of money.


A nominee is a licensed insolvency practitioner chosen by the individual or corporate debtor to conduct the process of putting a proposal for a voluntary arrangement to the creditors. The nominee’s duties will include writing a report and comments on the proposal, and convening a meeting of creditors to consider it.

Official receiver (OR)

An official receiver (OR) is an official employed by the Insolvency Service, an executive agency of the Department of Business, Innovation and Skills, who is responsible for many aspects of bankruptcy and compulsory liquidation.


A petition is a written application to the court for relief or remedy.


Companies or individuals give a preference if they do something to put a creditor in a better position on a bankruptcy or winding up. A liquidator or trustee in bankruptcy can apply for an order restoring the position to what it was before the preference. The preference must have taken place within a defined time limit prior to the start of the bankruptcy or liquidation and the court must be satisfied that it was made with the desire to prefer the creditor.

Proof of debt

Proof of debt is a document submitted by a creditor to the licensed insolvency practitioner or official receiver giving evidence of the amount of the debt.

Proxy form

A proxy form is a document given to a creditor with the right to vote at a creditors’ meeting.


A receivership is the general term applied when a person is appointed as a receiver or administrative receiver over certain assets.

Secured creditor

A secured creditor is a creditor who holds security over the company’s assets (e.g. a bank, or other financial institution). This class of creditor is paid before ordinary creditors.

Statutory demand

A statutory demand is a formal notice requiring payment of a debt exceeding £750 within 21 days. It is used as the first step in bankruptcy and compulsory winding up.

Transaction at undervalue

A transaction at undervalue refers to companies or individuals making a gift or entering into a transaction in which the value to them is significantly less than the value to the other party.  Transactions at undervalue can be challenged by a liquidator or a trustee in bankruptcy.

Unsecured creditor

An unsecured creditor is any creditor who does not hold security). This class of creditor will rank last of all in cases where a dividend is likely to be paid.

Voluntary arrangements

See individual voluntary arrangement (IVA) and company voluntary arrangement (CVA).

Voluntary liquidation

See creditors’ voluntary liquidation and members’ voluntary liquidation.

Winding up

See liquidation.

Winding-up order

A winding-up order 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.

Wrongful trading

When the directors of a company know or should know that it has no reasonable prospect of avoiding insolvent liquidation, they must take all reasonable steps to avoid losses to creditors.  A liquidator can sue them if they fail to do this.  A typical example of wrongful trading is where the directors trade on for too long and cause additional losses for creditors.

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1 Union Street
Saltcoats KA21 5LL

McLenan Corporate is a trading name of McLenan Corporate Solutions Limited, 1 Union Street Saltcoats KA21 5LL. Company Number SC651445.

Margo McLenan is licensed to act as Insolvency Practitioner in the UK by the Insolvency Practitioner Association.

Insolvency Practitioners are bound by the Code of Ethics when carrying out all professional work relating to an insolvency appointment.