PHOENIX COMPANY GLOSSARY

Administration

The unfortunate circumstance of financial difficulties leads a company to enter into an administration. Then, an administrator is called upon to take over the company and determine if it is capable to continue operating or should be sold out to the new owners for turning the company around. In case of a company’s inability to function further, it is shut down eventually and the assets are sold out to compensate for its financial responsibilities.

Administrator

When a company goes into administration, a person held responsible for controlling that company is an administrator. An administrator is assigned by the Court and supervises all the company’s actions and possesses overriding rule over the entire business.

AGM

An Annual General Meeting which enables the shareholders to set forth any matter and directors provide information regarding the previous year and predicts the future. They also cast their votes for any changes that are suitable to be executed within the meeting i.e. swapping the auditors or directors. It is essentially held every year.

Arrears

A term used when a debt is built up due to failure of paying invoices or making timely payments. The debt holder has the right to place a claim for money return in case if you are unable to pay the debt.

 A term used when you have not paid invoices/made payments on debts and has built up and needs to be paid, if you do not pay the debt holder may take action to claim the money back.

Asset

It indicates something that is your possession and holds value when you plan to sell it such as a property or stock etc.

Balance Sheet

It is a document displaying the liabilities, assets and capital of a business or an enterprise at a certain point in time, describing the expenses undertaken over the preceding time and the balance of income.

Bankruptcy

 A term generally used to describe an instance where a person is at a loss to pay their debts in the due date or they owe more than they own. This engenders loss of control over your possessions and entails suspension of a company director for as long as the bankruptcy ban period lasts. Moreover, credit rating is also gravely influenced by bankruptcy.

Cash Flow

The movement of cash or cash equivalent back and forth between a company and the creditor(s) best defines cash flow. The analysis of cash flow is often carried out to determine the liquidity position of an enterprise. It illustrates the amount of cash entering into the business and its source.

CCJ

It is a County Court Judgment or court action where a company or an individual can petition against a lender who is at a loss to pay the debt. The court issues a limited time to the person in question for timely payment of debt. If not followed, the company/person will be in a position to take further action.

Charging Order

If monies through a CCJ are not restored by the creditor, they can register for a charging order. This protects a debt against a property. So, if the property is sold, the charging order allows the creditors to retrieve their money from the profit gained from that property.

Comparison of Outcome

When insolvency is encountered by a company and suggests for an administration, the Insolvency practitioner needs to consider the potential events that may follow after company dissolution and liquidation and compare them with their own proposal.  

Companies House

This is the place for registration of ALL Ltd and PLCs. They accumulate all the information and make this information accessible to the public such as accounts and directors. They also play a major role in company incorporation & dissolution.

County Court

It is a court with authority over single or more counties. This kind of court works in dealing with civil (non-criminal) affairs. Businesses typically involve County Court to make decisions regarding the restoration of the money they are owed.

Credit Rating

Financial service providers and banks make use of a tool that analyses your possibility of honoring your debt. It helps in decision-making for provision of funds according to the respective score or rating. The rating is based on any previous defaulted history or court judgments.

Creditors

A term used for an organization or an individual, who is indebted to another organization for provision of their services. Creditors are categorized as liabilities as it signifies outstanding money.

 Creditors Petition (bankruptcy)

If an individual creditor has lent more than £750, they have the liberty to petition for a debtor anticipated to be bankrupt. On the other hand, collaboration among the creditors can be made to meet the £750 requirement. Debtor local county court with bankruptcy jurisdiction typically brings about proceedings. Creditors can request for someone to be made bankrupt on following conditions: Unsecured debt or the debtor seem at a loss to pay a fixed sum pm money.

CVA

A Company Voluntary Arrangement: CVA is utilized in a situation where a company is in an insolvent position. CVA is used to put up a deal which necessitates the payment of some percentage of the debt in a given span of time for the sake of easing up the cash flow complications and pressure on the directors. This enables the directors to emphasize on ameliorating the business situation.

 

CVL (Creditors Voluntary Liquidation)

Liquidation refers to shutting down a company’s trading, selling all the business assets and revoking all contracts. The liquidation initiative is taken by the shareholders of an organization and executed by an insolvency practitioner (see below)

 

Debtors

An individual or an organization that is indebted to you for the provided services. It is classed as a current asset.

DBEIS - Department of Business, Energy, Innovation and Skills

It is a government agency acting in behalf of all and desire for higher productivity in all industries by endorsing company’s creativity and artistry. The DBEIS also assist in employment related problems like staff redundancy. The DBEIS governs the Insolvency Service in England and Wales.  

Debenture

Debenture refers to security of a company over assets in exchange for a loan.

 

Debtors petition (bankruptcy)

 It explains a circumstance where a debtor resolves to make them self bankrupt. To execute this, a debtor essentially petition to the county court (refer to bankruptcy above).

 

Dilapidations

A lessee is enforced a duty of repairing any damages in the property to make it lettable after a lease is terminated. A surveyor inscribes a repair list and work that is generally known as a schedule od dilapidations. The price can be somewhat steep.

 

Directors

The individual who is involved in the decision making of the entire company is referred to as its director. The director is held accountable for governing the business and its effective management. The protection is offered to them from personal risk via limited liability provided that they act rightly.

 

Directors Disqualification

An individual can be banned from operating as a director by the DBIES if he is announced as bankrupt or has perpetrated a particular insolvency offence. It is considered illegal for the person in question to operate as a director or a manager of a company for the assigned period of debarment.

 

Dissolution

A procedure involving the series of steps to legally strike off a company that no longer aims to exercise trading. Company dissolution entails the trading cessation for at least 3 months prior commencement of the legal process.

 

Distraint

It is a widely used tool by landlords in case of failure to pay rent or other payments. A landlord possesses variety of powers provided that the company in question is unable to keep up with the negotiated payment. Distraint is explained by the affect a landlord’s agent can have on the entry by removing goods or business assets for sale to pay for the due debt. He/she is spared long waiting time span for this to be executed. In theory, distrain can be pursued 1 week after a rent payment d due. No judgement is needed for either her/him.  

 

Domino effect

A great deal of problems ensues for an individual facing an insolvency issues (e.g. from borrowing/overconsumption, drinking or gambling and is being followed by creditor(s)). It is more likely that the spouse of that individual may become insolvent which will result in deprivation of a matrimonial home that, for instance, may support the security granted to bank.

 

Factoring

It is an assistance service in desperate times by financial institutions e.g. banks or lenders. It offers to pay an enterprise for the unpaid invoices and assist in gathering the persisting funds for a specified fee. They charge companies for providing them the lending service for a particular period of time unless the debt is paid.

 

FinTech

It is an expression used for technology companies that are associated with finance sector i.e. mobile banking, credit cards, online credit providers and other transactions.

 

Fixed and Floating Charge

It is the charges that are probably be created by a mortgage, debenture or other security documentation over certain assets as security for the loans taken or other indebtedness. Basically, a charge is of two types, fixed and floating. For assets and material that are liable to change on a regular basis e.g. stock, floating charge is suitable. Independent articles moves into and out of a charge as their selling and buying is processed in the usual flow of events.  However, the crystallization of a floating charge is executed in case of a default or a similar circumstance. The effectiveness of a floating charge is comparatively less than a fixed charge but it appears to be more flexible.

 

Fraudulent trading

The continuation of trading process without any reasonable likelihood of repaying debt & with the intent of deceiving the creditors describes fraudulent trading.

 

Going Concern

It is a circumstance in which an organization keeps trading for the current time span and can compensate for its costs and build some money.

 

High Court

It Is established in Westminster and is known as Her Majesty’s High Court of Justice. It is superior to a County Court and us the third highest court in the country. Lower court’s cases can be re-appealed here.

 

HMRC

Her Majesty’s Revenue and Customs: It refers to a government entity which undergoes the process of collection and control of PAYE, NIC VAT etc.

 

Insolvency practitioner

It’s an expert who is granted a license by the DBEIS and is specialized in insolvency. They undertake measures to shut down a company in the best interest of all involved parties. IPs can only are authorized to become a liquidator or an administrator.

 

Insolvent

It is a term used for a scenario where an enterprise or an individual are at a loss to pay or compensate for their debts with current funds or business assets. This occurs where liabilities surpasses assets.

 

Insolvent company

It signifies an organization who fails to repay due debts. Due to their inability to timely compensate for their debts they suffer grave cash flow problems and remain unable to pay what they owe thus considered as insolvent company.

 

Interim order

It is a situation where an individual applies for an IVA (see below), they get the right to request the court to make them secure from legal or bankruptcy actions from an individual they are indebted to.

 

Investigating Accountants

The responsibility of checking accounts, forecasts, marketing & management of the business you oversee for the bank that lent it money is owned by the investigating accountant. The actual reason behind appointing them is to gain an insight about how secure a debt is that the company holds. Refer to the guide to investigating accounts.

 

IVA

Individual Voluntary Arrangement: It is much like company voluntary arrangement. It is focused on eliminating the personal debt. The main difference between IVA and CVA is that IVA is individual based rather than company based. It allows them to progress towards a fresh start and improve the quality of their lives.  

 

Joint Several Liability

 Joint and Several Liability suggest that all associates are accountable for partnership debts fully or partly depending on their potential to pay. Thus for satisfaction of the debts a creditor(s) /liquidator can pursue the member with the most assets possession followed by next and so on until a point where all debts are clarified or until all partners are rendered bankrupt.

 

Liability

Anything you borrow that makes you accountable for returning the owed commodity can be a liability. Typically it involves a mortgage, store cards and loan payment credit.

 

Limited Company

The action of segregating a business legally to a separate individual so that except him neither the business’s shareholders nor its directors are liable for any of its (proper) activity. Generally, these businesses are owned privately.

 

Limited Liability

Limited companies and PLC shareholder are enabled to restrict their accountabilities via Limited Liability procedure. It can be utilized when a business faces hindrances and allows the shareholders to lose only the money they invested in to the business if it defaults. 

Liquidation

Liquidation is the series of steps followed to strike off a company or an enterprise. The procedure is propelled by a liquidator who discards all the business assets. The proceedings are circulated to the creditors and the remaining shareholders.  The process finishes off by completely wiping off the company’s existence from the companies registers.

 

Liquidator

An individual who works things out to liquidate/dissolve a company is a liquidator. Moreover, the condition of being an insolvency practitioner must be met by the liquidator.

 

Moratorium

It is a restricted time span in which the occurrence of a certain activity is not permitted. Generally, the moratorium is set out for protecting a company, business or a person.

 

No fault bankruptcy

The rules concerning bankruptcy have been remarkably eased under the Enterprise Act 2002 by UK government. It has been ensued since April, 2004, that an only partner or trader involved in a partnership that is at a loss to run a business provided that, there are no issues reported regarding fraud, misfeasance or recklessness etc. is given the authority to petition for bankruptcy (Refer to the procedure below) and be dispensed from the requested bankruptcy within a particular span of time say 12 months.

 

Nominee

It is a legally licensed insolvency practitioner that assists in placing a deal on the table with creditors involving a proposal of a CVA/IVA and governs the legal issues and compliance i.e. presiding over the creditor’s meetings, keeping check of the management accounts and forecasts.

 

Official Receiver

It is a court’s officer and a civil employer in The Insolvency Service. An Official Receiver is filled in with the information regarding bankruptcy or company dissolution order by the court. He is expected to administer the initial stage through his staff which involves assembling and securing any business assets and probing the factors that led to bankruptcy or dissolution.

 

Partnership

It is much like a sole trader but differs in the aspect that it involves more than one owner and various amounts of businesses can be owned by a variety of individuals.  

 

PAYE Pay As You Earn

It is a policy proposed by the government which includes subtracting the tax from a working employee’s monthly income. This is processed by the employer to eliminate the hassle for employee of calculating his/her own tax and National Insurance payments. Payment of tax preceding gathering is the responsibility of the employer. Failure to perform the required task signifies insolvency.

 

Phoenixing

It is described as the instance of eliminating repayment of debt when an insolvent company is shut down followed by forwarding the business to a new company.  

 

Pension Fund

It is an assortment of money which is built to raise funds for paying retirement pensions and for paying the pensions to ex-employees who were qualified to deserve it. This money is piled up by contributions.

 

Personal Guarantee

A tool used by the financial service providers to promise their debt by involving the director/partner in business to personally endorse the guarantee of the debt even if the debt was or was not serving the purpose of the company. Failure to repay the negotiated debt results in extracting the money from the guarantor.

 

PLC

It involves an organization that places their shares on stock exchange. The shares can be owned by any interested entity. The company holds confined liabilities and is usually a huge firm which is expected to unveil all their activities. The amount of 50,000 is the minimum share capital allowed and the essential requirement of documenting annual accounts within 6 months of the year end must be met.  

 

Prescribed Part

The amount of money utilized by the Administrator or Liquidator for serving the dividend payment purpose to the unsecured creditors best defines the Prescribed Part. The calculation of the prescribed part can be done by taking 50% of the first £10,000 at hand and 20% afterwards up to a maximum range of £600,000.

 

PVA

It abbreviates Partnership Voluntary Arrangement. It is much like CVA but differs in an aspect that it serves companies that are built on a partnership. The company is owned by several proprietors and each of them is separately liable. PVA offers the same advantages as

CVA.

 

Receiver

To execute collection and serve the purpose of administration of a company’s assets, a receiver is allotted. A receiver is typically appointed by banks and performs the duty of gathering bank’s debts by only disposing the available assets. A receiver is generally indifferent about other unsecured creditors or shareholders of the involved company. 

 

Receivership

Non-remittance of loan/debt ultimately leads to liquidation of the company. In such scenario, the debt holder is in the receivership and calls upon the receiver to carry out selling of company’s assets effectively to repay the owed debts. As the company loses control of business following this, it results in staff redundancy (refer below).

 

Redundancy

It is the employee’s expulsion accredited to shutting down a business (permanently or temporarily) or striking off a certain department that has served its purpose and is no longer needed. Other reasons could be downsizing or several issues encountered by an organization that leads to opting for this possibility.

 

Reverse Premium

Is where a landlord may actually pay a tenant to occupy their premises. This may take the form of a contribution towards fit out costs or an actual lump sum.

 

SFLGS Small Firms Loan Guarantee Scheme:

The main purpose of this scheme is to facilitate the default borrowers to get them some time for effective running of their businesses.  The scheme makes it possible for novel and existing businesses to lend a certain range of funds falling between £5,000 and £250,000 from high street banks and other financial entities. 75% of the loan is underwritten by the DBEIS. In case if company defaults, the bank is given the right to claim for 75% from the DBEIS.

 

Shareholders

An individual or an institution that legally buys one or multiple shares of the company from open market that is quoted as PLC describes a shareholder. They have a right to opinion for running the business and they get a share from the proceedings as a dividend.

 

Seize goods

It is the practice observed by the Enforcement Office to seize the goods and sell them for payment of debt owed by the organization in question.

 

Simultaneous Voluntary Arrangements

It is the fusion of individual voluntary arrangements simultaneously intending to secure the partnership and the individual debtors. In it, partnership debts are dealt by partnership arrangements and individual debts are dealt by individual arrangements. It also prevents the individual partners from the repercussions of the partnership debts.

 

SIP 16

This abbreviates Statement of Insolvency Practice 16. It alludes to pre-pack administration. These regulations must be abide by an Insolvency Practitioner and assure the dismissal of any practice that involves misusage of administration of this kind. Relevant disclosures made to the creditors must also be ensured.

SOFA (Statement of Affairs)

 It is a document summarizing your financial matters. It enlists your possessions, assets, liabilities and living cost.

 

Sole Trader

It is the sole owner of a business who is entirely responsible for running the business on daily basis and addresses its debts. Sole traders usually run smaller firms incorporating few workers. 

 

Statutory Demand

Typically, this is pursued after a judgment is obtained by a creditor. It is defined by a formal demand asking for payment of an undisputed debt ranging over £5000 and is functional since 1st October 2015. It necessitates the debt payment within 21 days following the demand. A fee is processed by the creditor for documenting this demand.

 

Supervisor

A supervisor works to implement collection of CVA/IVA contributions and affirms that contributions are maintained up to date. Supervisor default ensues provided that the supervisor is at a loss to keep the contributions up to date followed by CVA/IVA abortion which impels liquidation/bankruptcy.

 

Trading Out

This term is used for situations where an individual keep trading along difficult times to recompense for their issues and upgrade their company’s position.

 

Trustee in bankruptcy

It is an individual who keeps the property on behalf of another. Where a bankruptcy is concerned the IP keeps the property in question of a bankrupt individual/institution on behalf of the creditors and is termed as the trustee.

Turnaround practitioner

Turnaround practitioner can broadly be considered as a company doctor who assists and advises a drowning company due to its ailment, to maintain its composure and get on its knees for effective functioning of business.

 

Turnover

A business or a company acquiring an amount of money over a certain period of time defines its turnover. However, the obtained money is not profit; instead, it is the total business income in a set period of time.

 

Tribunal

This is an authorized body that can regulate and execute judgments on particular types of disputes. It involves judges who are not essentially legal professionals but specializes in their respective fields.  

Unique Selling Proposition (USP)

It is a specific element of your product/service that makes you stand out amongst other products/services, sets you apart from your competition and appeals the target customers. It can be a single or multiple distinguishing characteristic(s).

Validation Order

This court order is requested by a company or an organization to unfreeze their bank accounts. It encourages precluding the company’s bank liability against the withdrawn money.

 

VAT (Value Added Tax)

It is also known as goods and service tax and is gathered for HM Revenue and Customs by the companies. It is a duty paid on qualifying good of 20% over the selling price of the company excluding any VAT paid for goods the company purchased in the same period.

 

Walking Possession

The enforced seizure of your goods, equipment, stock etc. on your property by a bailiff (for County Court) or a sheriff (for High Court) who acquires entrance on your property provided that there is proven unpaid debt and court costs, describes a walking possession. Failure to mutually reach a consensus leads to immediate removal of good from the premises and selling of assets in a time span of 5 days. The selling of goods after implementation of a walking possession is a criminal offence. After acquiring a walking possession, a bailiff can force entry your premises after 5 days.

 

Warrants

A warrant suggests a permit or an authorization in law. Most of the time in statute, preceding an administrative action, a warrant against a certain individual is essentially a pre-requisite. In case of a creditor being unpaid of the debt they were owed, they can request for a warrant of execution under judgment. Debtor is issued a notice of warrant and is furthered to local court provided that the debtor is in another area. A bailiff is permitted a walking possession by the court to seize the goods of the debtor when he is unable to make required payments in the given time.

 

Wrongful trading

If a company has surpassed the payment due date and the director still keeps the trading operational then he is held accountable for wrongful trading. He ought to know that there is no purpose of meeting the company’s liabilities anymore.

 

WUP (Winding Up Petition)

It refers to a tool that a company can utilize to request the court for company closure provided that the debtor persistently rejects to repay the due debts.  

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