TERMINOLOGY

What is insolvency?
Insolvency is when companies or individuals are unable to pay their debts as they fall due.

What is a Company Voluntary Arrangement (CVA)?
This is when an insolvent company can set up a repayment scheme which is agreed by the creditors. This is a legally binding agreement, which provides underperforming business with the chance to continue trading as a going concern.

What is Administration?
Administration is open to insolvent businesses. The company is placed under the control of an Insolvency Practitioner and the protection of the Court. Plans are made to reorganise the company with an aim to rescue the company, maximise asset realisation or put forward an alternative option. Whilst a company is in Administration, creditors cannot take any actions against it unless permission has been granted by the court or the Administrator.

What is a receivership and an administrative receivership?
If a business is unable to continue trading in the long term, the company must be placed under a formal insolvency to protect the position of both creditors and directors. Business may continue as normal. A Receiver is appointed to recover assets for the benefit of the lender, this is by a secured creditor, usually a bank. An Administrative Receiver is appointed over most or all of a company’s assets

What is liquidation?
When a company is unable to trade any more (this can also occur following a receivership or administration) the assets of the company are sold by the Liquidator, and turned into cash to pay creditors.

What is a Creditors Voluntary Liquidation (CVL)?
This is the most common type of liquidation procedure. Shareholders, usually at the directors’ request, decide to put a company into liquidation. An Insolvency Practitioner is appointed to act as a liquidator for the directors and shareholders. A meeting of creditors is held to confirm the appointment of the Liquidator or to appoint an alternative in his place.

What is a compulsory liquidation?
Creditors, the company or a shareholder may petition the court to put a company into liquidation, usually due to the fact that a company is insolvent.

What is a Members Voluntary Liquidation (MVL)?
This is a solvent liquidation, in which a liquidator is appointed by the shareholders and the company has enough assets to settle all debts, costs and liabilities within twelve months.

What is an Individual Voluntary Arrangement (IVA)?
IVA is an alternative to Bankruptcy. It is a legally binding contract between an individual and the creditors whereby a payment schedule is agreed to settle liabilities over a period, usually between 3-5 years.

What is Bankruptcy?
Bankruptcy is one way of dealing with personal debts you cannot pay. The bankruptcy proceedings free you from debts so you can make a fresh start, subject to some restrictions.