Administrator
(also known as voluntary administrator)
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A person appointed
in a voluntary administration to determine whether a company should come
under administration according to an approved deed of company arrangement, be
wound up, or revert to normal operation. [2]
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Charge
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A form of security
for a debt taken by a creditor over company assets.
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Committee of creditors
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A small group of
creditors, or their representatives, often appointed by the creditors of a
company at the first meeting in a voluntary administration. The committee's
role is to consult with the voluntary administrator and to receive and
consider reports by the voluntary administrator. The committee may be called
upon to approve the voluntary administrator's fees. The voluntary
administrator must report to the committee when it reasonably requires.
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Committee of inspection
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A small group of
creditors and shareholders, or their representatives, often appointed by the
creditors and shareholders of a company in liquidation to assist the
liquidator. The committee is often called on to approve the liquidator’s fees
and sometimes to approve the compromise of debts or the entry into contracts
extending beyond three months by the liquidator.
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Compulsory winding up
(also known as court liquidation)
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A winding up of a
company that starts as a result of a court order, made after an application
to the court, usually by a creditor of the company.
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Controller
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A person appointed
by a secured creditor to deal with assets subject to a charge. Includes a
receiver, and receiver and manager.
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Creditor
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A person who is
owed money.
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Creditors' voluntary winding up
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A winding up of a
company initiated by the company's creditors. A creditors' voluntary winding
up may be initiated only if the company in insolvent. [3]
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Deed administrator
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The external
administrator appointed to oversee a deed of company arrangement.
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Deed of company arrangement
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A binding
arrangement between a company and its creditors governing how the company's
affairs will be dealt with, which may be agreed to as a result of the company
entering voluntary administration. Aims to maximise the chances of the
company, or as much as possible of its business, continuing, or to provide a
better return for creditors than an immediate winding up of the company, or
both.
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Director
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A person appointed
as a director of a company who is then responsible for directing and managing
the affairs of a company.
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External administrator (also known as insolvency practitioner)
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A general term for
an external person formally appointed to a company or its property. Includes
provisional liquidator, liquidator, voluntary administrator, deed
administrator, controller, receiver, and receiver and manager.
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Fixed charge
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A charge taken by a
lender over particular assets of a company. The company may not dispose of
these assets without the consent of the lender.
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Floating charge
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A charge taken by a
lender over general assets of a company. The company is usually able to use
and dispose of these assets (e.g. stock, debtors) in the ordinary course of
business without the secured creditor’s consent. A floating charge converts
to a fixed charge over those assets if certain events listed in the charge
document occur. These usually include the appointment of a liquidator or
other external administrator.
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Insolvent
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Unable to pay all
debts when they fall due for payment.
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Liquidation
(also known as winding up)
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The orderly winding
up of a company’s affairs. It involves realising the company’s assets,
cessation or sale of its operations, distributing the proceeds of realisation
among its creditors and distributing any surplus among its shareholders. The
three types of winding up are: compulsory (court-ordered), creditors’
voluntary and members’ voluntary.
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Liquidator
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A person appointed,
in a winding up of a company, to assume control of the company's affairs and
to discharge its liabilities in preparation for its dissolution. The
liquidator ascertains the liabilities of the company, converts its assets
into money, terminates its contracts, disposes of its business, distributes
the net assets to creditors and any surplus to the proprietors, and
extinguishes the company as a legal entity by formal dissolution. [4]
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Member (of a company)
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A shareholder.
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Members’ voluntary winding up
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A form of winding
up for solvent companies, initiated by the company.
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Priority creditor
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An unsecured
creditor entitled to be paid ahead of other creditors (e.g. employees).
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Provisional liquidator
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A liquidator
appointed by the court to preserve a company’s assets until a winding up
application is decided.
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Realise
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Convert assets into
cash, often by selling them.
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Receiver
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An external
administrator appointed by a secured creditor to realise enough assets
subject to a charge to repay a secured debt. Less commonly, a receiver may
also be appointed by a court to protect a company’s assets or to carry out
specific tasks.
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Receiver and manager
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A receiver who has,
under the terms of their appointment, the power to manage the company’s
affairs.
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Receivership
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An insolvency
procedure where a receiver, or receiver and manager, is appointed over some
or all of the company’s assets.
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Scheme of arrangement
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A reorganisation of
a company's capital structure or rescheduling of its debts, following a
period of financial difficulties. The purpose is to meet the demands of
creditors while avoiding liquidation.[5]
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Secured creditor
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A creditor who has
a security (e.g. charge or mortgage) over some or all of a company’s
property.
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Security
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Any right or
interest in property that renders the repayment of a debt more secure and
certain.[6]
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Solvent
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Able to pay all of
one's debts, as and when they become due and payable.
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Unsecured creditor
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A creditor who does
not hold a security over a company’s property.
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Voluntary administration
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A process begun by
the appointment of an administrator to a company that is in financial
difficulties (but could possibly be saved), during which the administrator
investigates its affairs to recommend to creditors whether it should come
under administration according to a deed of company arrangement approved by
its creditors, be wound up, or revert to normal operation by its directors.[7]
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Winding up order
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A court order for
the winding up of a company. The first step in a compulsory winding up.
Usually made after an application by a creditor.
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