The Ultimate Insolvency Glossary of Terms

Welcome to our comprehensive glossary of insolvency terms, a jargon buster created to help company directors have an understanding of crucial terms when navigating the insolvency process. We’ve included some useful resource links to insolvency and government organisations.

Active Proposal to Strike Off

An active proposal to strike off refers to the process initiated by a company director or secretary to dissolve a company voluntarily. This action involves submitting Form DS01 to Companies Househttps://www.gov.uk/government/organisations/companies-house, indicating the company’s intention to cease trading and be removed from the register of companies. However, it’s important to note that creditors and other stakeholders must be notified of this proposal, and any objections must be resolved before the strike-off is approved. This process is typically used when a company is no longer active or viable and wishes to close its operations formally.

Administration

A formal insolvency procedure initiated to rescue a company, achieve better results than liquidation, or realise funds for preferential or secured creditors. An administrator, typically a licensed insolvency practitioner, oversees this process.

Administrator

A licensed insolvency practitioner appointed to manage a company’s affairs during administration. Acting as an agent of the court, the administrator works towards achieving the objectives of the administration process.

Administrative Receiver

Appointed by a floating charge creditor, usually a bank, to realise assets on its behalf. This procedure is being phased out under the Enterprise Act and is available only to certain creditors.

Annulment

Cancellation of a legal process, often used in the context of bankruptcy proceedings.

Bankruptcy Order

Issued by the court, based on either a creditor’s or debtor’s petition, declaring an individual bankrupt.

Bankruptcy Petition

A formal request made to the court, either by the debtor or a creditor, seeking to declare the debtor bankrupt.

Bounce Back Loan

Bounce Back Loans (BBL’s) are loans of up to £50k, advanced by lenders to businesses, who following the onset of the Covid-19 pandemic in March 2020, required easy access to emergency funding. Over two million businesses took out one of these Bounce Back loans, which equated to a total of £48 billion being loaned out. The terms of the loans ensured that no payments had to be made by the business for the first 12 months, interest rates were kept low with the loans guaranteed by the government (and not the directors).

Bounce Back Loan Debt

Bounce Back Loan Debt refers to the money borrowed by businesses under the UK government’s Bounce Back Loan Scheme (BBLS). These loans, aimed at supporting small and medium-sized enterprises (SMEs) during the COVID-19 pandemic, must be repaid according to the loan agreement terms.

Charge

Security taken by a creditor over property to protect against non-payment of a debt, such as a mortgage.

Charging Order

Issued by the court, granting a legal charge on the debtor’s interest in their home, even after discharge from bankruptcy.

Company Administration

A formal procedure in which an Insolvency Practitioner can be appointed to take control of the company’s affairs whilst a plan to rescue, sell or liquidate the company is prepared.

Company Directors Disqualification Act 1986

Legislation outlining grounds for disqualifying directors, emphasising corporate governance and accountability.

Company Pre-Pack Administration

A Pre-Pack Administration is an insolvency process where, with the assistance of an Insolvency Practitioner, the sale of the company’s business and assets is negotiated before the formal appointment of an Administrator.

The Administrator is appointed over the Company and shortly thereafter proceeds to complete the sale.

In a Pre-Pack Administration, the Administrator’s role is to legally facilitate the “pre-arranged” sale. This differs from a more conventional Administration process whereby the Administrator takes control of the business and markets it for sale to potential buyers.

Compulsory Liquidation

Involves winding up a company after a court petition, often by creditors like HMRC.

Company Voluntary Arrangement (CVA)

It is a formal agreement allowing financially struggling companies to repay debts to creditors through a structured plan. This arrangement helps companies avoid liquidation by providing a pathway for financial recovery.

Contributory

Every person liable to contribute to a company’s assets in winding up, typically shareholders who haven’t paid for their shares in full.

Creditor

Someone owed money by an insolvent company or individual, holding a claim against their assets.

Debenture

A document evidencing a debt or granting security for a loan, often used in securing loans with charges over company assets.

Director’s Loan

A Director’s Loan is money withdrawn by a company director for personal use or other purposes unrelated to the business. It can be formal or informal, but directors must maintain clear records and adhere to legal and tax requirements.

Director’s Personal Guarantee

It is a commitment by a company director to personally repay a company debt if it cannot meet its financial obligations. It involves using personal assets, like property or savings, as collateral for the debt.

Discharge

Frees a bankrupt from the restrictions of bankruptcy and releases them from most debts. This occurs automatically after one year but may be sooner.

Dividend / Distribution

Any sum paid to unsecured creditors in insolvency proceedings.

Estate

Assets available to a debtor’s trustee to pay creditors, including property, investments, and personal belongings.

Fixed Charge

Held over specific assets, preventing the debtor from selling them without the secured creditor’s consent.

Floating Charge

Held over a company’s general assets, allowing the company to use and sell these assets until the charge crystallises.

Guarantee

An agreement to pay a debt owed by a third party, enforceable when evidenced in writing.

Income Payments Order (IPO) / Agreement (IPA)

Ordered by the court or agreed upon by the debtor, directing part of their income to the trustee if it exceeds their living expenses.

Insolvency

Occurs when a company or partnership faces financial distress, unable to meet its obligations. Recognising signs of insolvency is vital for prompt action and risk mitigation.

Insolvency Act 1986

Legislation consolidating insolvency law and procedures in the UK, complemented by the Enterprise Act.

Insolvency Practitioner

Authorised professional specialising in insolvency proceedings, authorised by the Secretary of State or recognised professional bodies.

Insolvency Practitioners Association (IPA)

The Insolvency Practitioners Association (IPA) is a UK professional body for insolvency practitioners. It sets high standards, regulates members, and provides support and training to ensure excellence in the insolvency profession.

Insolvency Service

It is a UK government agency that oversees insolvency procedures, regulates insolvency practitioners, and administers bankruptcies and liquidations.

IR35 Contractor

An IR35 contractor refers to a self-employed individual who provides services to clients through an intermediary, like a personal service company (PSC). IR35 legislation in the UK determines whether these contractors should be classified as employees for tax purposes, based on factors like control and substitution. Compliance with IR35 rules is crucial to avoid tax liabilities and penalties.

Liquidation

Involves winding up a company’s affairs, selling assets, and distributing proceeds to creditors. Whether voluntary or compulsory, liquidation entails adherence to legal protocols.

Liquidation Committee

A Liquidation Committee is a group of creditors appointed to oversee and advise the liquidator during the winding-up process of a company. It represents the interests of creditors and provides input on key decisions.

Liquidator (Winding Up)

Administers the liquidation of a company or partnership, appointed by the Official Receiver or as an insolvency practitioner.

Licensed Insolvency Practitioner UK

A Licensed Insolvency Practitioner (IP) in the UK is a qualified professional authorised to handle insolvency procedures and offer expert advice on financial matters. IPs must meet rigorous qualifications set by recognised bodies like the Insolvency Practitioners Association (IPA) or the Institute of Chartered Accountants in England and Wales (ICAEW). They play a vital role in guiding insolvent individuals and companies through complex financial challenges, ensuring compliance with laws and ethical standards while maximising returns to creditors.

London Gazette

Official publication containing legal notices, including insolvency-related announcements.

Member (of a Company)

Registered as a member of a company, such as a shareholder in a limited company.

Members Voluntary Liquidation (MVL)

Is a voluntary process used by solvent companies to distribute assets to shareholders and wind up operations. It’s initiated by company members when the company no longer serves its purpose or for tax planning reasons.

Moratorium

A Moratorium is a temporary period during which legal action by creditors against a company is restricted. It provides breathing space for the company to explore restructuring options without the threat of enforcement action.

Nominee

Insolvency practitioner acting as a nominee, preparing groundwork for a voluntary arrangement before its implementation.

Officer (of a Company)

A director or secretary of a company, responsible for its management and compliance.

Official Receiver

Employed by The Insolvency Serviceinsolvenolven, manages bankruptcies and compulsory company liquidations, serving as an officer of the court.

Petition

Formal application made to the court, initiating legal proceedings.

Preferential Creditor

Entitled to receive certain payments ahead of other unsecured creditors in insolvency proceedings, including pension schemes and employee claims.

Pre-pack Administration

Pre-pack Administration is a process where the sale of a company’s assets is arranged before the appointment of an administrator. The sale is completed shortly after the administrator’s appointment, often preserving the business and saving jobs.

Proof of Debt

Statutory form completed by a creditor in compulsory liquidation, stating the amount claimed and supplied by the trustee or liquidator.

Provisional Liquidator

Appointed to preserve a company’s assets pending the hearing of a winding-up petition.

Proxy

Allows a person to appoint someone to vote on their behalf at a meeting, including creditors’ meetings.

R3

R3, also known as the Association of Business Recovery Professionals, is a prominent UK organisation representing insolvency and restructuring professionals. It provides support, education, and advocacy for its members, promoting best practices and collaboration within the industry.

Release

Discharges the Official Receiver or an Insolvency Practitioner from liabilities of office as trustee/liquidator or administrator.

Secured Creditor

Holds security, such as a mortgage, over a person’s assets for money owed.

Shadow Director

Gives instructions on which the directors of a company are accustomed to act, without being formally appointed.

Statement of Affairs

Sworn under oath, completed by a bankrupt, company officer, or director(s), stating assets and giving details of debts and creditors.

Supervisor

Insolvency Practitioner appointed to supervise the carrying out of an individual or company voluntary arrangement.

S455 Tax

S455 tax is a charge imposed on directors’ loan accounts in close companies if the loan isn’t repaid within nine months after the corporation tax accounting period ends.

TM01

TM01 is a form filed with Companies House in the UK to notify the resignation or termination of a company director.

Trust Deed

A Trust Deed is a formal agreement between an individual and their creditors to repay debts over a specified period. It is a common form of insolvency arrangement in Scotland, similar to an Individual Voluntary Arrangement (IVA) in England, Wales, and Northern Ireland.

Trustee

Trustee in bankruptcy is either the Official Receiver or an insolvency practitioner who takes control of a debtor’s assets, mainly to sell them.

Unsecured Creditor

Creditor who does not hold security for money owed, often including suppliers and trade creditors.

Voluntary Liquidation

Not involving the courts or the Official Receiver, voluntary liquidation includes members’ voluntary liquidation for solvent companies and creditors’ voluntary liquidation for insolvent companies.

Winding Up Order

Court order for the compulsory winding up or liquidation of a company or partnership, usually based on a creditor’s petition.

What our clients tell us

Tom Fox was incredibly helpful as I prepared to liquidate a couple of companies - clear advice, a respectful approach to both myself as director and the creditors, and a reasonable fee structure vs many of the national IP's I spoke to whilst researching who to work with.

Mike S

I engaged Umbrella accountants to oversee a Members Voluntary Liquidation for the small consultancy business I've been running. The team talked me through the MVL process, steps and requirements. The paperwork involved was well explained and straightforward, with the initial disbursement of funds handled very quickly and professionally under tight deadlines.

Brendan N

I extend my appreciation of your professional efficiency in handling my company business and herewith say thank you.

Maxine R

Umbrella.UK Insolvency guided me as sole Director of my small limited company, and the shareholders, through every step of a Members Voluntary Liquidation in a very efficient manner. The steps required were clearly laid out and proactively managed by their licensed practitioner. From first meeting through to an interim distribution of funds to shareholders took only a few days in our case. Thereafter, Umbrella will be managing all of the downstream actions required to complete the process with HMRC and Companies House, through to the final discharge of the company.

Alex O

I'd just like to thank Tom for your help with the closure of my company. You have been highly efficient and very professional throughout. Thank you.

Tony D

First of all, I would like to say a BIG Thank You for all of your assistance over the past year. I would not be in the positive state of recovery without Umbrella Insolvency. Your care and assistance at the application stage last summer, along with the advice throughout the year, has been great. I would not hesitate to tell anyone in my negative situation where to turn to.

Mr TM

Before I came to Umbrella.UK Insolvency I was in a bad place mentally due to debt because I believed I would be in my current situation for a long time to come. Umbrella.UK Insolvency walked me through my options and helped me pick the best one. I am genuinely amazed at what they managed to do for me and can now afford to live comfortably, and without the constant worry of debt looming over me.

I engaged Tom to arrange an IVA for me after I ran into financial difficulties as a result of the closure of my company. He introduced me to Sarah and both of them as a team worked tirelessly through Lockdown to get the best outcome for me and my family. Both Sarah and Tom were patient, thorough and incredibly compassionate for our situation. They attained the best outcome for us and I couldn't speak more highly of them. Thank you to you both, Amazing work.

Thank you very much for your assistance in a successful proposal. We are ever so grateful as this is a chance to transform our lives; or rather you have given us a second chance to have our lives in order. Thank you for your patience and perseverance throughout that you showed.

Thank you so much for your help with my IVA. As an ex-company Director my life took a downward spiral when creditors from my liquidated company called upon my personal guarantees. I had been treading water for months, ran up credit card debts and borrowed from family. When a creditor instigated bankruptcy proceedings against me I thought I was going to lose my house. I contacted Umbrella.UK Insolvency who stopped all the phone calls and threatening letters. Umbrella.UK Insolvency explained things in a way I could understand. They negotiated with creditors and my IVA went through, now I can sleep at night again and I kept my home. Thomas Fox was extremely knowledgeable and I truly thank him and his team.

Paul G

Following a personal recommendation, we appointed Umbrella.UK Insolvency to handle the voluntary liquidation of our business (MVL). Tom and his team were excellent, keeping us well informed throughout and working effectively with the company's accountants to ensure all documentation was produced and filed on time. I have since recommended Umbrella.UK to friends looking for similar services and I have no hesitation in recommending them more widely.

Kevin B

I engaged Umbrella .UK Insolvency to oversee a Members Voluntary Liquidation for the small consultancy business I've been running. The team talked me through the MVL process, steps and requirements. The paperwork involved was well explained and straightforward, with the initial disbursement of funds handled very quickly and professionally under tight deadlines.

Brendan N

Thank you to Tom Fox at Umbrella Insolvency for helping me close my limited company after being forced to close it due to IR35 issues. Tom clearly has a lot of experience doing MVLs to help limited contractors like myself caught by IR35. I was surprised by how much money I was actually left with. Very impressed, thank you!

David G

I had the pleasure of working with Umbrella.UK for an insolvency matter. Their compassionate approach, coupled with their expertise, helped me find the right solution for my company's financial difficulties. I highly recommend their services.

M Harris

Umbrella.UK's team of insolvency practitioners demonstrated exceptional knowledge and professionalism throughout our engagement. Their ability to provide clear solutions and communicate complex matters made the CVL insolvency process much more manageable.

Emma D

As a director facing company financial difficulties during covid, I was overwhelmed and unsure about the next steps. Umbrella.UK stepped in and guided me through the options for helping my business recover with patience and expertise. I cannot thank them enough for their exceptional service and my company is in a much healthier situation.

Mark T

I am extremely grateful to Umbrella.UK for their prompt and effective insolvency assistance. Their deep understanding of the insolvency process and dedication to helping struggling businesses saved us from a dire situation. Thank you!

S Johnson

Tom Fox at Umbrella.UK provided invaluable guidance and support during a challenging time for our business. Their team of experts helped us navigate through insolvency with professionalism and efficiency. Highly recommended.

John S