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A
- Administration
- A UK insolvency rescue procedure designed to protect a company from its creditors while a restructuring or sale of the business is arranged. Administrators can be appointed by the directors of the business or by the Court. The administration will automatically put an legal claims, disputes against the business, petitions or court action on hold for a minimum of 1 year whilst the administrators seek to rescue the business and turn things around.
Case Example:
Perfect Venues 123 Ltd., a manufacturing firm in Birmingham with debts of £2 million, entered administration to prevent liquidation. With the administrator’s strategies, they renegotiated contracts and eventually repaid £1.5 million of its debts, saving 200 jobs.
- Affidavit of Debt
- A sworn statement confirming the amount of debt owed by a debtor.
Case Example:
ABC Ltd. in Manchester produced an affidavit by the company director of debt for a sum of £25,000, initiating formal legal proceedings against a client who had not paid for delivered services.
- Annulment of Bankruptcy
- The legal process that cancels a bankruptcy order, usually because debts have been paid in full or if the order should not have been made.
Case Example:
Jane, from Bristol, was declared bankrupt over unpaid debts totalling £50,000. She later managed to clear the debt using an inheritance and successfully applied for annulment of her bankruptcy.
- Arbitration
- A private, contractual form of dispute resolution, which provides for the determination of disputes by one or more arbitrators by reference to general law or chosen rules of law.
Case Example:
Two tech companies in Leeds had a £200,000 contractual dispute. Using arbitration, they resolved the matter in three months, avoiding a potential year-long court battle.
- Asset Tracing
- The process of identifying and locating assets that may be recovered in debt recovery and insolvency actions. It is a very useful tool in the early due diligence process.
Case Example:
A wealthy individual in Glasgow defrauded investors of £5 million. Asset tracing experts uncovered £3 million in assets, including properties in Spain and hidden bank accounts in the Cayman Islands.
- Assignment of Debt
- The transfer of debt from one party (the assignor) to another (the assignee). The assignee then gains the right to initiate debt recovery proceedings to recoup the owed amount as if the debt was their own. Understanding the nuances of debt assignment can assist businesses in protecting their financial interests.
Case Example:
A design firm in Liverpool assigned a debt of £10,000 to a collection agency for 60% of its value after their client refused to pay for completed work.
- Attachment of Earnings Order
- This legal order directs an employer to make deductions from an employee’s wages to satisfy a debt. The deductions continue until the debt is paid off in full. It is an effective enforcement action for individual debtors who are employed.
Case Example:
A debtor in Cardiff owed £8,000 in personal loans. Due to consistent missed payments, an attachment of earnings order was obtained, deducting £500 monthly from the debtor’s salary.
- Admission of Debt
- A formal acknowledgment by an individual or entity confirming that they owe a specific amount of money to another party rather than seeking to dispute the amount owed.
Case Example:
After receiving a solicitor’s demand letter, Mr. Howard in Leeds admitted to owing £7,000 to a supplier and arranged a payment plan.
- Acknowledgment of Service
- A legal document that confirms receipt of court papers by the defendant. The defendant must file an acknowledgement of service within 14 days of the claim form and particulars of claim having been served.
Case Example:
Upon receiving a claim form for an alleged debt, Mrs. Baker in Bristol filled out an acknowledgment of service form within 14 days to notify the court that she received and is aware of the claim. Mrs. Baker will then have an additional 14 days i.e. 28 days in total to file a Defence to the claim and try to negotiate.
- Antecedent Transactions
- Transactions made by a company before its insolvency that may be reversed if they are deemed to have disadvantaged the creditors.
Case Example:
A company in Nottingham sold machinery worth £50,000 to a related company for only £5,000, three months prior to insolvency. This could be viewed as an antecedent transaction.
- Administration Order
- A court order placing a company under the control of an administrator, aiming to either rescue the company, achieve better results for the creditors, or realise assets.
Case Example:
Facing insurmountable debts, GHI Ltd in Bristol was placed under an administration order, granting control to an appointed administrator.
- Administrative Receiver
- An insolvency practitioner appointed by a debenture holder (typically a bank) to realise a company’s assets and repay the secured debt.
Case Example:
After JKL Ltd in Manchester defaulted on its bank loan, the bank appointed an administrative receiver to sell the company’s assets and recover its debt.
- Assets
- Items of value owned by a company or individual, including tangible and intangible items, which can be used to settle debts.
Case Example:
MNO Ltd’s assets in Liverpool included properties worth £1 million, machinery valued at £500,000, and intellectual property rights estimated at £300,000.
- Asset and Liabilities Statement
- A report detailing all assets owned by an individual or company and all the debts owed.
Case Example:
Mrs. Johnson in Oxford, while applying for a business loan, presented an asset and liabilities statement showing business assets worth £300,000 and liabilities of £100,000.
- Administrative Receiver
- An insolvency practitioner appointed by a lender (usually with a floating charge) to recover the money owed by a company.
Case Example:
DEF Ltd in Manchester defaulted on its bank loan, leading the bank to appoint an administrative receiver to recover its dues.
- Administrative Receiver
- An insolvency practitioner appointed by a lender (usually with a floating charge) to recover the money owed by a company.
Case Example:
DEF Ltd in Manchester defaulted on its bank loan, leading the bank to appoint an administrative receiver to recover its dues.
- Administrative Receivership
- The legal process in which an administrative receiver is appointed by a secured creditor (typically holding a floating charge) to realize company assets to repay what is owed.
Case Example:
When GHI Ltd in Liverpool failed to repay its secured debts, the lender initiated an administrative receivership, taking control over the company’s assets.
- Asset Based Lender
- A lender who provides loans based on the value of specific assets like accounts receivable, inventory, or machinery.
Case Example:
ABC Finance in Birmingham, an asset-based lender, provided a loan to JKL Ltd based on its machinery’s value.
- Associates
- Individuals or companies closely connected to a debtor, often family members, business partners, or related companies.
Case Example:
Mr. Smith’s brother, who owns 40% of DEF Ltd in Cardiff, is considered an associate of the company.
- Annual General Meeting (AGM)
- A yearly meeting of shareholders of a company where they review the annual accounts, elect directors, and discuss other company matters.
Case Example:
A company in Kensington held its AGM to present its financial results, and shareholders voted on proposed dividends and board appointments.
- Arrears
- Money that is owed and should have been paid earlier.
Case Example:
Mr. Jones in Bristol was in arrears on his mortgage payments by two months, owing £2,000 to his bank.
- Annual General Meeting (AGM)
- A yearly meeting of shareholders of a company where they review the annual accounts, elect directors, and discuss other company matters.
Case Example:
A company in Kensington held its AGM to present its financial results, and shareholders voted on proposed dividends and board appointments.
- Arrears
- Money that is owed and should have been paid earlier.
Case Example:
Mr. Jones in Bristol was in arrears on his mortgage payments by two months, owing £2,000 to his bank.
B
- Bailiff
- A Bailiff is a legal officer with authority to execute writs, processes, and arrests. In the context of debt recovery, bailiffs may seize goods and assets from a debtor to sell and use the proceeds to repay the debt.
- Bailiff Action
- A Bailiff is an officer of the court authorized to execute writs, warrants, and seize goods to pay off debts. Bailiff action is a common method used to enforce a County Court Judgment.
Case Example:
A local shop in Southampton had unpaid business rates of £12,000. Bailiff action led to the seizure and auction of shop goods worth £9,000 to cover part of the debt.
- Balance Sheet Insolvency
- Occurs when a company’s total liabilities exceed its total assets.
Case Example:
TechCo, a startup in Newcastle, had total assets of £100,000 but long-term debts of £500,000. Despite this balance sheet insolvency, monthly revenues of £30,000 allowed it to continue operations.
- Balloon Payment
- A large payment that is scheduled at the start or at the end of a series of smaller, usually equal payments for repayment of a debt, loan agreement or finance arrangement.
Case Example:
Mrs. Patel took a five-year car finance deal in Oxford with monthly payments of £300. At the end of the term, she made a balloon payment of £5,000 to finalize her car’s ownership.
- Bankruptcy
- Bankruptcy refers to the legal status of an individual or organisation that cannot meet its financial obligations. Bankruptcy in the UK can result in the selling of assets to satisfy creditors and may profoundly affect one’s credit rating and future borrowing. It could also significantly affect your career and job prospects.
Case Example:
A former property mogul in Edinburgh, with total debts of £3 million, declared bankruptcy. His assets, including properties and cars, were liquidated, recovering £2.2 million for the creditors.
- Bankruptcy Order
- This is a legal declaration that a person is unable to pay their debts leading to the appointment of a trustee in bankruptcy i.e. someone that manages the bankrupts assets and will seek to sell and liquidate those assets to pay off the creditors. A Bankruptcy Order can free someone from overwhelming debts, but it comes with severe financial and legal consequences.
Case Example:
Mr. Johnson from Hull accumulated credit card debts of £60,000 over several years. Unable to devise a repayment plan, he received a bankruptcy order from the court.
- Bankruptcy Order
- This is a legal declaration that a person is unable to pay their debts leading to the appointment of a trustee in bankruptcy i.e. someone that manages the bankrupts assets and will seek to sell and liquidate those assets to pay off the creditors and any liabilities. A Bankruptcy Order can free someone from overwhelming debts, but it comes with severe financial and legal consequences.
Case Example:
Mr. Johnson from Hull accumulated credit card debts of £60,000 over several years. Unable to devise a repayment plan, he received a bankruptcy order from the court.
- Bankruptcy Petition
- A formal application to the court for an individual’s assets to be taken over and sold to pay off debts on the basis that they cannot pay their debts. A creditor can file a bankruptcy petition against an individual if they are owed £5,000 or more. The debt will typically be liquidated and straightforward i.e. not disputed by the debtor or complex.
Case Example:
Creditor A in Watford filed a bankruptcy petition against a debtor who defaulted on a personal loan amounting to £40,000.
- Bankruptcy Restriction Order (BRO)
- An order that extends certain bankruptcy restrictions against a bankrupt person for 2 to 15 years.
Case Example:
Mr. Smith in Coventry was found to have run up debts recklessly. A BRO was imposed, preventing him from being a company director for ten years.
- Breach of Contract
- When one party involved in a contractual agreement fails to meet their obligations.
Case Example:
A car dealership in Brighton promised delivery within a month. When the car was not delivered on time, it was a breach of contract.
- Bankrupt
- A legal status of a person who cannot repay the debts they owe to creditors, following a court order.
Case Example:
After accumulating personal debts of £200,000 and being unable to pay them, Mr. Smith in Edinburgh was declared bankrupt by the court.
- Bond
- A financial instrument representing a promise to repay a specific amount of money, plus interest, at a future date.
Case Example:
DEF Corp in Liverpool issued bonds worth £1 million at 5% interest, payable in 10 years to fund its expansion plans.
C
- Calderbank Offer
- A written offer, typically made on a without prejudice basis during negotiations between parties, to settle a dispute, not open for acceptance for a specified period.
Case Example:
In a Birmingham property dispute, Mrs. Patel made a Calderbank offer of £150,000 to settle with the opposing party. The other party had two weeks to accept otherwise it will be automatically withdrawn and cannot be accepted.
- Chargeback
- A return of funds initiated by the cardholder with their credit card company, which is forcibly initiated by the issuing bank of the instrument used by a consumer to settle a debt.
Case Example:
Mr. White in Newcastle received a faulty TV. He requested a chargeback from his credit card company, which refunded £500.
- Charging Order
- A Charging Order secures a debt against the debtor’s property. The debt becomes a formal charge, much like a mortgage, meaning that the debt must be paid off when the property is sold. This is a common tool in debt recovery to ensure eventual repayment. The beneficiary of a charging order could apply to the court for an order for sale forcing the defendant to sell their property to repay the charge holder.
Case Example:
A court in Bristol granted a charging order on a debtor’s £300,000 house, allowing a creditor to recover a £50,000 debt when the house sold.
- Collection Agency
- A company hired by creditor to recover funds that are past due or accounts that are in default.
Case Example:
ABC Ltd. in Manchester transferred a £20,000 debt to a collection agency, which then pursued the debtor for payment.
- Company Voluntary Arrangement (CVA)
- A formal arrangement where a company agrees with its creditors on a plan to repay its debts over a specified time.
Case Example:
A retail chain in Liverpool entered into a CVA, repaying 40% of its £1 million debt over five years.
- Compulsory Liquidation
- A court order forcing an insolvent company to stop operating and sell its assets. Typically compulsory liquidation is started by a creditor presenting a winding up petition against the company.
Case Example:
A tech firm in Leeds with liabilities exceeding assets by £2 million underwent compulsory liquidation.
- Consumer Credit Act 1974
- A significant piece of legislation that governs most of the consumer credit and consumer hire agreements in the UK. It sets out what creditors must do when lending money and what can happen if debtors fail to meet their obligations.
Case Example:
Mrs. Khan in London was mis-sold a credit card with hidden fees. She used the Consumer Credit Act 1974 to challenge the provider and got a refund.
- Consumer Credit Agreement
- A legal agreement between a creditor and consumer, stipulating the terms and conditions of the credit provision.
Case Example:
Mr. Thompson in Southampton entered a Consumer Credit Agreement for a £10,000 personal loan over five years.
- Costs Budget
- An estimate of the costs one party expects to incur in the litigation process. The Civil Procedure Rules in England & Wales require the costs budget to be set out in the form of Precedent H in the proceedings. This will allow the Court to manage the costs of the claim and each phase of the proceedings. Typically for claims over the value of £10m or more there is no requirement to file a costs budget but the parties may agree to file one in order for the costs to be managed by the Court.
Case Example:
In a Glasgow patent case, ABC Ltd. submitted a costs budget of £150,000 for legal and expert fees.
- Counterclaim
- A claim made in opposition to another claim in a legal case.
Case Example:
In a Nottingham rental dispute, a landlord claimed £3,000 in damages. The tenant counterclaimed, seeking £1,500 for deposit withholding.
- County Court Judgment (CCJ)
- A County Court Judgment, or CCJ, is a legal declaration issued by the County Court or higher court that confirms a debt’s existence and the debtor’s obligation to repay it. A CCJ can have severe implications for the debtor’s credit rating and can lead to enforcement action if ignored.
Case Example:
Mr. Evans from Cardiff did not repay a £5,000 loan. The lender obtained a CCJ, affecting Mr. Evans’ credit score.
- Credit Reference Agency
- An agency that collects and maintains information on consumers’ borrowing and payment habits to help lenders assess creditworthiness.
Case Example:
Before granting a mortgage in Edinburgh, a bank checked an applicant’s credit history with a Credit Reference Agency.
- Creditor
- A creditor is an individual, business, or financial institution that lends money or extends credit with the expectation of being paid back. In a debt recovery or insolvency situation, the creditor is the party seeking payment.
Case Example:
Mr. Williams in Belfast borrowed £20,000 from her bank. Here, the bank is the creditor.
- Creditor’s Meeting
- A formal meeting where creditors vote on proposals put forward in insolvency proceedings, such as in an IVA or company voluntary arrangement (CVA).
Case Example:
Stakeholders in a Norwich-based hotel convened a creditor’s meeting to discuss debt repayment amidst financial hardship.
- Creditor’s Petition
- A formal application to the court for the winding up of a company or bankruptcy of an individual, initiated by a creditor by way of a winding-up petition or bankruptcy petition on the basis the debtor is unable to pay its debts. In the case of a company, the debt must be £750 or more and in the case of an individual the debt must be £5,000 or more in order to present a bankruptcy petition. In addition, the debt must be liquidated and not disputed.
Case Example:
A supplier in London, owed £30,000, filed a creditor’s petition after multiple failed attempts to retrieve the payment from a debtor.
- Claim Form
- A court document used to start a civil case, outlining the nature of the claim and the relief sought.
Case Example:
Mr. Evans in London believed he was unfairly dismissed from his job and initiated legal proceedings by filing a claim form against his former employer.
- Consequential Losses
- Secondary financial losses that occur because of direct losses, not immediately resulting from a breach.
Case Example:
Following the machinery parts delay, the manufacturer in the above example also lost a £20,000 contract due to their inability to meet a client’s deadline, a consequential loss.
- Company Restoration
- The process of reinstating a company to the Companies Register after it has been dissolved.
Case Example:
Three years after its dissolution, stakeholders of a company in Belfast successfully applied for company restoration to recover an unforeseen asset.
- Composition
- An agreement between a debtor and creditors where creditors agree to accept a certain percentage of their total claim as full settlement.
Case Example:
Owing £100,000, Mr. White in London proposed a composition where he would pay £60,000 immediately, and the creditors would write off the remaining £40,000.
- Contractual Interest
- Interest on a debt or loan as agreed upon within a contract.
Case Example:
YZA Corp in London borrowed £500,000 at a contractual interest rate of 6% annually, as stated in their loan agreement.
- Compounded Interest
- Interest calculated on both the principal sum and on any accumulated interest.
Case Example:
Mr. White in Bristol invested £10,000 at a compounded interest rate of 4% annually. After one year, the interest is calculated on £10,400 (initial amount + first year’s interest), not just the original £10,000.
- Connected Persons
- Individuals or companies that have a close relationship with a company or its directors, typically including family, related companies, or directors themselves.
Case Example:
The director of MNO Ltd in Edinburgh also controls another company, PQR Ltd, making the two entities connected persons.
- Creditor’s Committee
- A committee of a bankrupt’s or insolvent company’s largest creditors, formed to represent all creditors in discussions with the trustee or liquidator.
Case Example:
Following the insolvency of STU Ltd in Manchester, a creditor’s committee was established, comprising its five largest creditors to oversee the liquidation process.
- Companies House
- The United Kingdom’s registrar of companies, responsible for maintaining the Big Register of Companies, where all limited companies are registered and where specific company details are available for public access.
Case Example:
Before setting up his own business, John checked Companies House to ensure the name he wanted was not already taken.
- Credit Rating
- A measure of a person’s or organisation’s ability to repay debts, typically based on their financial history, current assets, and liabilities. It is used by lenders to assess creditworthiness.
Case Example:
After missing several credit card payments, Lisa’s credit rating was negatively affected, making it harder for her to get a loan.
D
- Debenture
- A long-term security yielding a fixed rate of interest, issued by a company, and secured against assets.
Case Example:
ABC Ltd., a company in Manchester, issued a debenture to raise £1 million, offering a 5% interest rate backed by its factory assets.
- Debt Adjustment
- The modification of debt terms, which can include interest rates, repayment periods, or amount owed.
Case Example:
Mrs. Taylor in Cardiff, struggling with her £10,000 debt, negotiated a debt adjustment, securing a lower interest rate for her repayments.
- Debt Collection Agency
- Debt Collection Agencies specialises in recovering debts on behalf of creditors. They usually operate for a fee or a percentage of the recovered debt and are often employed when initial attempts to recover the debt have failed.
Case Example: Averson Ltd. in London, after failing to retrieve £300,000 from a client, handed the case to a debt collection agency.
- Debt Consolidation
- Taking out a single loan to settle multiple debts, often with the goal of securing a lower interest rate or simplifying repayments.
Case Example:
Mr. Brown in Birmingham consolidated his three credit card debts into one loan of £15,000 with a lower interest rate.
- Debt Management Plan (DMP)
- A plan set up to help individuals repay their debts at an affordable rate over a particular period.
Case Example:
Mrs. Jones from Liverpool, with debts totalling £20,000, entered a DMP, agreeing to repay £350 monthly for five years.
- Debt Recovery
- Debt recovery refers to the legal process of pursuing and collecting outstanding payments from individuals or businesses. It is an essential aspect of the credit system and is often undertaken by dedicated debt collection agencies or legal professionals specialised in the field.
Case Example:
A fashion retailer in Brighton employed legal methods to recover a debt of £7,000 from a wholesale buyer.
- Debt Recovery Agent
- An individual or firm specialising in retrieving unpaid debts.
Case Example:
A medical clinic in Newcastle hired a debt recovery agent to collect £3,000 in unpaid patient bills.
- Debt Relief Order (DRO)
- An alternative to bankruptcy, a DRO is a legal process and a way to have your debts written off if you have a low level of debt (under £20,000) and have few assets.
Case Example:
A Bristol resident with a £15,000 debt and limited assets was granted a DRO, providing relief from creditors.
- Debt Rescheduling
- The act of rearranging the terms on existing debt agreements, typically involving adjustments to payment timings or amounts.
Case Example:
Able 123 Ltd. in Southampton, facing a cash crunch, negotiated a debt rescheduling to extend the repayment period of their £2 million loan.
- Debt Settlement
- A process in which a debtor negotiates with creditors to pay a reduced amount to settle an outstanding debt.
Case Example:
Mrs. Smith in London settled a £10,000 credit card debt by negotiating to pay a one-time lump sum of £6,500.
- Debt Settlement Agreement
- This is a formal agreement where a debtor agrees to pay a reduced amount to settle a debt in full. The creditor, in turn, agrees not to pursue further legal action once the agreed-upon sum is paid.
Case Example:
Mr. Wilson in Norwich agreed to a debt settlement of £4,000 on his £6,000 debt, saving £2,000.
- Debtor
- A debtor is an individual or entity that owes money to another party, typically a creditor. The debtor may face legal consequences if unable to fulfil their repayment obligations, potentially leading to court judgments or bankruptcy.
Case Example:
ABC Ltd., based in Sheffield, borrowed £50,000 from a bank, making it a debtor to the bank.
- Default Judgment
- A judgment entered against a defendant who has failed to plead or defend a claim that has been brought by a claimant. The Civil Procedure Rules requires the defendant to file an acknowledgement of service or defence to a court claim within 14 days or 28 days (if an acknowledgement of service has been filed). If not, the claimant will be entitled to request the court to order default judgment.
Case Example:
A property owner in Oxford failed to respond to a suit for unpaid rent. The court issued a default judgment ordering him to pay £5,000 plus fixed costs.
- Default Notice
- A Default Notice is a formal letter sent by the creditor after a debtor fails to make required payments. It gives the debtor a specific period to repay the outstanding amount before legal action is taken.
Case Example:
After Mr. Clark in Chester missed three mortgage payments, he received a default notice demanding immediate payment.
- Defence
- A formal legal response by a defendant to a claim made against them in court. Under the Civil Procedure Rules the defendant must file a defence to a court claim within 14 days or alternatively 28 days if an acknowledgment of service has been filed.
Case Example:
In a contract dispute in Coventry, the defendant filed a defence, arguing services rendered were subpar.
- Director Disqualification
- A legal order following director disqualification proceedings preventing an individual from acting as a company director due to insolvency related or company misconduct including breach of director duties. Director disqualification proceedings are typically initiated by the Insolvency Service following the liquidation of a company.
Case Example:
Following financial misconduct at a tech firm in Leicester, the director received a seven-year director disqualification.
- Director’s Personal Guarantee
- A commitment made by a company director to be personally liable for a specific financial obligation of the company, should the company be unable to meet it.
Case Example:
When a company in Liverpool sought a £100,000 loan, the bank requested a Director’s Personal Guarantee. Mr. Johnson, the director, agreed, making him personally liable if the company failed to repay.
- Disputed Debt
- An amount of money claimed by one party to be owed by another, where the latter challenges or denies the obligation. If the debt is disputed it should not typically go through the insolvency proceed and will require a legal claim issued at Court by way of a claim form. The dispute needs to be on genuine and substantial grounds, and not merely raised by the opponent to delay matters.
Case Example:
A company billed Mr. Thompson £5,000 for services. Mr. Thompson, believing the charge to be excessive, disputed the debt, claiming the correct amount was £3,500.
- Distress Warrant
- An order issued by the court that allows an authorised person to seize goods from a debtor’s premises to pay off the debt.
Case Example:
When a boutique in Bristol failed to pay three months’ rent, the landlord obtained a distress warrant and seized merchandise worth £2,000.
- Disclosure
- The process by which parties in a legal dispute reveal relevant documents in their possession to the opposing side.
Case Example:
In a contractual dispute, Firm A in Liverpool was required to provide disclosure of all email correspondences related to the deal to Firm B.
- Direct Losses
- Immediate financial losses that result directly from a breach of contract or another wrongful act.
Case Example:
After a supplier in Birmingham failed to deliver machinery parts on time, the manufacturing company faced direct losses from halted production totalling £30,000.
- Due Diligence
- Comprehensive research and assessment of a business or individual before entering into an agreement, ensuring all facts are understood.
Case Example:
Before acquiring a smaller firm in Newcastle, MegaCorp Ltd conducted due diligence, examining the firm’s financials, liabilities, and operational risks.
- Directors Loan Account
- An account detailing transactions between company directors and the company itself, which may be in debit (the director owes the company) or credit (the company owes the director).
Case Example:
In the year-end accounts of TechNet Ltd in Aberdeen, the director’s loan account showed a debit of £15,000, indicating the director had withdrawn funds beyond their salary.
- Dividend
- A payment made by an insolvent estate or a bankrupt’s estate to its creditors.
Case Example:
From the assets realised, creditors of a company in Newcastle received a dividend of 25p for every pound owed.
- Debtor
- An individual or company that owes money to another entity or person.
Case Example:
GHI Ltd in Birmingham owes its supplier £200,000 for goods purchased on credit, making GHI Ltd a debtor.
- Dissolution
- The official closure or ending of a company or partnership.
Case Example:
After successfully concluding all business affairs and obligations, JKL Enterprises in Southampton was formally dissolved and removed from the Companies House register.
- Distraint
- The legal process where landlords seize a tenant’s goods to recover unpaid rent.
Case Example:
When VWX Ltd in Leeds failed to pay three months’ rent, the landlord used distraint to seize office equipment as compensation.
- Director
- An appointed or elected member of the board of directors of a company, responsible for the strategic direction and decision-making of the company.
Case Example:
Jane, as a director of JKL Ltd, participates in board meetings and makes crucial decisions about the company’s future.
E
- Early Conciliation
- A procedure where both parties attempt to resolve a dispute through conciliation before resorting to a tribunal or court action.
Case Example:
After being unfairly dismissed, Miss Richards initiated early conciliation, resulting in a mutual agreement with her employer without proceeding to a tribunal.
- Enforcement Action
- Enforcement actions are legal steps taken to compel the payment of a debt following a court order or judgment. This may include the seizing of assets, bank account freezes, or wage garnishments. High Court Enforcement Officers (HCEOs) usually carry out these actions.
Case Example:
A company in Bristol failed to pay a county court judgment and the creditor therefore sought to enforce the judgment by way of a charging order over the company’s assets.
- Enforcement Agent
- The official term for a certified bailiff authorized to seize and sell assets to recover unpaid County Court Judgments (CCJ).
Case Example:
Mr. Allen, a homeowner in Leeds, faced an enforcement agent’s visit due to unpaid council taxes, risking seizure of valuable items.
- Enforcement Notice
- An enforcement notice can be served by a government agency or the Court when they believe a firm or individual has breached the law or certain rules. This notice will specify the breach and any required corrective action.
Case Example:
A restaurant in Brighton received an enforcement notice from the local council to address health and safety violations.
- Equitable Charge
- A charge over an asset that does not confer a legal interest in the asset but grants a right to payment from the proceeds of the sale of the asset.
Case Example:
Mr. Patel in Leicester agreed to an equitable charge over his property when borrowing £50,000, allowing the lender to force a sale if he defaulted.
- Equity of Redemption
- A borrower’s right to reclaim property used as security for a debt, once that debt has been fully paid off.
Case Example:
Mrs. Clark in Cardiff repaid her £200,000 mortgage and exercised her equity of redemption to fully reclaim her property rights from the bank.
F
- Final Charging Order
- A legal remedy that secures a debt against a debtor’s property or land, ensuring payment from the property’s sale proceeds. A final charge order is usually ordered by the Court after an interim charging order. Once the interim charging order has been made by the Court the defendant will have an opportunity to put in submissions and legal arguments against the order being made final. If a Final Charging order is made, the beneficiary of that charge will be able to apply to the Court for an order for sale in respect of the property. An order for sale is slightly complicated by human rights arguments and when there are children involved.
Case Example:
After Mr. Smith in Nottingham failed to pay a £10,000 personal loan, the creditor obtained a final charging order, ensuring repayment when Mr. Smith’s property is sold.
- Financial Conduct Authority (FCA)
- A regulatory body in the UK that operates independently of the UK government and is financed by charging fees to members of the financial services industry. The FCA is responsible for overseeing financial markets, firms, and ensuring consumer protection.
Case Example:
A financial advisory firm in Manchester faced FCA scrutiny for misleading consumers about investment products.
- Fixed Charge
- A fixed charge is attached to a specific, identifiable asset. If the borrower defaults, the lender can seize that asset to recover their debt. The charge remains in place until the loan is paid off.
Case Example:
A company in Glasgow secured a £1 million loan with a fixed charge over its office building, limiting its ability to sell without the lender’s permission.
- Fixed Costs
- Pre-determined legal costs recoverable from the losing side in a litigation, set out in court rules under the Civil Procedure Rules. This is becoming more and more important with the recent introduction of fixed costs for claims under £100,000.
Case Example:
In a property dispute in London, the court ordered the losing party to pay fixed costs of £2,500 pursuant to the Civil Procedure Rules.
- Fixed Sum Credit Agreement
- A credit agreement where the borrower is allowed to borrow a fixed amount and the repayment schedule is clearly defined.
Case Example:
Mrs. Johnson in Belfast entered a fixed sum credit agreement for a £5,000 loan, agreeing to 24 monthly payments of £208.33.
- Fixed Sum Loan Agreement
- An agreement where a lender provides a fixed amount of credit to a borrower, detailing repayment in equal instalments over time.
Case Example:
Mrs. Johnson in Belfast entered a fixed sum credit agreement for a £5,000 loan, agreeing to 24 monthly payments of £208.33.
- Fixed Sum Loan Agreement
- An agreement where a lender provides a fixed amount of credit to a borrower, detailing repayment in equal instalments over time.
Case Example:
Mrs. Johnson in Belfast entered a fixed sum credit agreement for a £5,000 loan, agreeing to 24 monthly payments of £208.33.
- Fixed Sum Loan Agreement
- An agreement where a lender provides a fixed amount of credit to a borrower, detailing repayment in equal instalments over time.
Case Example:
Mrs. Johnson in Belfast entered a fixed sum credit agreement for a £5,000 loan, agreeing to 24 monthly payments of £208.33.
- Floating Charge
- Unlike a fixed charge, a floating charge is attached to assets that are not fixed, such as inventory. The charge “floats” until such a time as it is converted into a fixed charge, usually upon the occurrence of a specified event like non-payment or insolvency.
Case Example:
A company in Brighton secures a £1 million loan with a floating charge over its inventory. If the company becomes insolvent, the lender will have priority to proceeds from the inventory’s sale.
- Forbearance Agreement
- An arrangement where a creditor allows a debtor temporary relief from debt payments due to financial hardship.
Case Example:
Ms. Jenkins in Liverpool, facing short-term financial trouble, negotiated a forbearance agreement with her bank, postponing her mortgage payments for three months.
- Foreclosure
- A legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
Case Example:
After Mr. White in Birmingham missed ten consecutive mortgage payments, the bank initiated foreclosure proceedings to recover the £300,000 owed.
- Fraudulent Trading
- Conducting business with the intent to defraud creditors or for any other fraudulent purpose.
Case Example:
MNO Ltd in Newcastle knowingly took on large orders without the intent or capability to deliver, aiming to pocket payments. This activity may be deemed fraudulent trading.
G
- Gazette Notice
- Public notices published in the Gazette, the UK’s official public record, concerning insolvency and debt recovery matters. Typically this will happen if a bankruptcy or winding up petition is presented against an individual or company to notify other creditors to support the petition for insolvency.
Case Example:
After a company was liquidated, a Gazette notice was published, notifying creditors of the company’s dissolution.
- Going Concern
- An accounting principle where a company operates with the reasonable expectation of continuing its activities in the foreseeable future without bankruptcy or liquidation.
Case Example:
DEF Ltd. in Edinburgh, despite short-term debts, was audited as a ‘going concern’ due to its strong future revenue predictions.
- Guarantor
- An individual or entity that guarantees to pay a debt or fulfil a commitment if the primary debtor defaults.
Case Example:
When Ms. Allen in Bristol took out a £10,000 loan, her father acted as a guarantor, pledging to repay if she could not.
H
- HMRC Time to Pay (TTP)
- An arrangement allowing businesses or individuals facing financial distress to spread tax payments to HMRC over a period.
Case Example:
GHI Ltd., owing £200,000 in taxes and facing cash-flow issues, negotiated a TTP arrangement with HMRC, spreading the tax debt over 12 months.
- Harassment
- Unlawful pressure or coercion used by creditors in the process of debt recovery.
Case Example:
Mr. Peters in Newcastle faced harassment from a debt collection agency with daily, threatening phone calls, violating FCA regulations.
- High Court Enforcement Officers (HCEOs)
- High Court Enforcement Officers, known as HCEOs, are officers with the legal authority to enforce High Court and County Court Judgments. They have broader powers than bailiffs and can seize goods, enter premises, and take several other actions to ensure debts are paid.
Case Example:
After a London business failed to pay a £50,000 court judgment, HCEOs were dispatched to seize assets equivalent to the owed amount.
- Hire Purchase Agreement
- A type of contract where an individual or business agrees to pay for goods in regular instalments while having the use of them. They will gain ownership once all payments are completed.
Case Example:
Mrs. Kelly in Cardiff acquired a car under a hire purchase agreement, agreeing to 36 monthly payments of £300.
- HM Revenue & Customs (HMRC)
- The UK government department responsible for the collection of taxes, the payment of some forms of state support, and the administration of other regulatory regimes.
Case Example:
Businesses in the UK submit their annual tax returns to HMRC to ensure they have paid the correct amount of corporation tax.
I
- Individual Voluntary Arrangement (IVA)
- An Individual Voluntary Arrangement (IVA) is a legal agreement between a debtor and their creditors, outlining a plan for repaying debts over a set period. An IVA is often viewed as an alternative to bankruptcy, allowing the debtor to retain more control over their assets.
Case Example:
Struggling with £40,000 in debt, Mr. Lewis in Manchester proposed an IVA to repay creditors £20,000 over five years.
- Injunction
- A court order compelling a party to do or refrain from doing specific acts.
Case Example:
A business in Belfast obtained an injunction against a competitor, preventing them from using a copyrighted logo.
- Insolvency
- Insolvency is a financial condition where an individual or organisation’s debts exceed their assets, or they are unable to meet financial obligations as they fall due. Insolvency can lead to legal proceedings, including bankruptcy or liquidation, to resolve the outstanding debts.
Case Example:
JKL Ltd. in Norwich faced insolvency, with £500,000 in debts and only £300,000 in assets.
- Insolvency Act 1986
- This is the primary piece of legislation governing insolvency and bankruptcy procedures in the UK. It sets out the rights and responsibilities of all parties involved in debt recovery and insolvency processes.
Case Example:
When a Leeds business faced liquidation, procedures from the Insolvency Act 1986 guided the process.
- Insolvency Practitioner
- A person authorised to act in connection with an individual voluntary arrangement, a company voluntary arrangement, the winding up of a company, or the bankruptcy of an individual.
Case Example:
Facing potential bankruptcy, Mr. Hughes in Stoke-on-Trent sought advice from an insolvency practitioner to explore options.
- Insolvent
- The state of being unable to pay debts as they fall due or having liabilities exceed assets.
Case Example:
MNO Ltd. in Southampton, with more liabilities than assets, was declared insolvent.
- Interim Application
- An application made during ongoing court proceedings, seeking a particular order before the final hearing. For example, an interim application could be made to determine a preliminary issue such as jurisdiction, scope of the claim, specific disclosure, summary judgment, strike out, security for costs etc. There may be adverse costs if the application is unsuccessful so care must be taken to consider the merits of the application, timings and the costs risks.
Case Example:
In a Liverpool property dispute, one party made an interim application, seeking to halt construction until the case’s resolution.
- Interim Hearing
- A preliminary hearing held during court proceedings to address specific issues or matters that need resolution before a final hearing.
Case Example:
During a dispute over unpaid business debts in London, an interim hearing was conducted to determine if the debtor’s assets should be frozen temporarily.
- Interim Order
- A temporary court order issued during the course of legal proceedings, effective until a further order or a final decision is made.
Case Example:
A London-based firm facing insolvency was given an interim order to prevent any creditor actions while an Individual Voluntary Arrangement (IVA) proposal was under consideration.
- International Debt Recovery
- The process of pursuing and collecting debts across international borders.
Case Example:
TechGlobal, based in London, hired a specialised agency to recover £200,000 from a client based in Berlin who failed to make payment for software services. The contract was governed by the law and jurisdiction of England & Wales.
- Illegal Dividends
- Dividends paid to shareholders when a company lacks sufficient distributable reserves, violating the Companies Act 2006.
Case Example:
Upon review, the auditors of a company in Oxford found that a recent £50,000 dividend distribution was illegal due to insufficient profits to cover it.
- Invoice Discounter
- A finance provider that lends money against a company’s outstanding invoices, but unlike factoring, the company retains control of the sales ledger and continues to collect payments from its customers.
Case Example:
YZA Corp in London used an invoice discounter to get immediate cash for its invoices, managing collections in-house.
- Invoice Factoring
- A financial arrangement where a company sells its outstanding invoices to a third party (a factor) at a discount, transferring control of the sales ledger and allowing the factor to collect directly from customers.
Case Example:
When ABC Tech in Glasgow needed immediate cash flow, they used invoice factoring, selling their invoices to DEF Finance, who then collected payments directly from ABC Tech’s customers.
- Investigating Accountant
- A professional, usually appointed by a bank or other creditor, to review the financial affairs of a struggling company to determine its viability.
Case Example:
With a company showing signs of financial distress, the bank appointed an investigating accountant to assess the company’s prospects.
J
- Joint and Several Liability
- A legal term describing a scenario where multiple parties are held responsible for repaying a debt. If one party cannot fulfil their responsibility, the others are obligated to cover the shortfall.
Case Example:
In a partnership in Edinburgh, both partners, under joint and several liability, were responsible for a £200,000 debt, meaning the creditor could pursue either partner for the full amount.
- Judgment Debt
- The amount of money that a court orders one party to pay another party. Typically, the losing party will be ordered to pay the judgment debt within 14 days but losing party could be given extra time i.e. up to 28 days if the Court considers it appropriate.
Case Example:
Mr. Smith was ordered to pay a judgment debt of £25,000 within 14 days after defaulting on a loan.
- Judgment Debtor
- A person or entity against whom a court judgment has been ordered for the payment of a debt.
Case Example:
After losing a case in Birmingham, ABC Ltd. became a judgment debtor when the court ruled they owed £100,000 to a supplier.
- Judgment Lien
- A court ruling granting a creditor an interest in the debtor’s property, in accordance with the judgment’s amount.
Case Example:
In Bristol, after Ms. Adams failed to pay a £50,000 business debt, a judgment lien was placed on her commercial property.
K
L
- LPA Receiver
- A Law of Property Act Receiver, typically appointed by a bank or lender, to recover amounts owed under a defaulted loan secured against a property.
Case Example:
A bank in Newcastle appointed an LPA Receiver when a property developer defaulted on a £2 million loan. The receiver took charge of the properties to recover the outstanding amount.
- Late Payment Fee
- A charge levied by a creditor when a debtor fails to make a payment on time.
Case Example:
Mr. Green in Liverpool missed his credit card payment deadline and incurred a £30 late payment fee.
- Late Payment Interest
- Interest charged on overdue payments, often stipulated in contracts or statutory regulations.
Case Example:
A company failed to pay an invoice of £10,000 within 30 days. The supplier charged late payment interest at 5%, amounting to an additional £500.
- Letter Before Action (LBA)
- A Letter before Action also known as a Letter before Claim is a formal communication sent to a debtor outlining the creditor’s intent to initiate legal action if the outstanding debt is not settled within a specific timeframe. This serves as a final warning, giving the debtor a chance to resolve the issue before court proceedings begin. The Letter before Action must comply with the relevant Pre-Action Protocol.
Case Example:
A builder in Leeds, owed £15,000 for renovation services, sent an LBA to the homeowner, giving them 14 days to pay before starting legal proceedings.
- Liability Order
- A court order, usually obtained by local authorities, confirming a debt is due, often in the context of unpaid council tax or child maintenance.
Case Example:
The Norwich City Council sought a liability order against a resident who had arrears of £2,500 in council tax.
- Lien
- A legal right granted by the owner of the property to secure a debt or the performance of an act. A lien provides the creditor with the right to sell the property or hold onto it if the debt is not discharged.
Case Example:
A mechanic in Sheffield placed a lien on a car after the owner failed to pay £1,200 for repairs.
- Liquidation
- The process of winding up a company’s affairs, selling its assets, and distributing the proceeds to creditors and shareholders.
Case Example:
After accumulating unsustainable debts, DEF Ltd. in Nottingham entered liquidation. Assets were sold, and the proceeds were used to pay creditors.
- Liquidator’s Report
- A formal document prepared by a liquidator, detailing the progress and processes undertaken during a company’s liquidation.
Case Example:
After the liquidation of a restaurant in Belfast, the liquidator’s report revealed asset sales of £300,000 and outstanding debts of £350,000.
- Liquidated Damages
- A predetermined amount of money parties agree upon as compensation in case of a breach of contract.
Case Example:
ABC Tech in Coventry signed a contract with a supplier and agreed on liquidated damages of £20,000 if either party breaches specific terms of the contract.
- Limited Company
- A company where the liability of members or subscribers is limited to what they have invested or guaranteed to the company.
Case Example:
DEF Ltd is a limited company; its shareholders are only liable up to the value of their shares in the company.
- Liabilities
- The debts or financial obligations a company or individual owes.
Case Example:
WX Ltd’s balance sheet showed total liabilities of £500,000, including bank loans and outstanding invoices.
M
- Mareva Injunction
- A type of court order that temporarily freezes a person’s assets to prevent them from being disposed of or transferred before a judgment is given.
Case Example:
After a London businessman was suspected of moving assets overseas to avoid a debt payment, his creditor successfully applied for a Mareva Injunction, freezing his assets worth £1.5 million.
- Mediation
- A form of alternative dispute resolution in which a neutral third party (mediator) assists disputing parties in reaching a mutually agreeable settlement. Mediation is often informal and can have various benefits for parties such as lower costs, quicker, allows the parties to have control over the process and formalities, and can allow the parties to come up with creative solutions without court action.
Case Example:
Two companies in Birmingham, in dispute over a £200,000 contract, entered mediation and, with the mediator’s guidance, reached an amicable settlement without going to court.
- Money Claim Online (MCOL)
- An online service in the UK, allowing individuals and businesses to make or respond to money claims over the internet.
Case Example:
Sarah from Bristol used MCOL to claim £3,000 she was owed by a former employer, simplifying the court procedure.
- Moratorium
- A temporary prohibition or suspension of an activity, often referring to a pause in debt repayments.
Case Example:
A struggling retail chain in Manchester secured a six-month moratorium, giving them a respite from repaying their £500,000 debt, while they attempted a financial restructuring.
- Multi-Track Claim
- In UK civil litigation, a type of claim usually involving large sums of money, complex issues, or a trial that will last longer than one day.
Case Example:
A complicated property dispute in Leeds, involving multiple properties and £2 million, was classified as a multi-track claim due to its intricacy.
- Multi-Track Claim
- In UK civil litigation, a type of claim usually involving large sums of money, complex issues, or a trial that will last longer than one day.
Case Example:
A complicated property dispute in Leeds, involving multiple properties and £2 million, was classified as a multi-track claim due to its intricacy.
- Member
- A payment made by an insolvent estate or a bankrupt’s estate to its creditors.
Case Example:
From the assets realised, creditors of XYZ Ltd in Newcastle received a dividend of 25p for every pound owed.
- Mortgage
- A loan secured against real property, usually land or buildings.
Case Example:
Mr. and Mrs. Lewis in Cardiff borrowed £250,000 as a mortgage to purchase a house, with the house serving as security for the loan.
- Misfeasance
- Wrongful or illegal acts by company directors or officers, especially those causing loss to creditors.
Case Example:
The director of a company in Newcastle was found guilty of misfeasance for diverting company funds for personal use.
- Moratorium
- A temporary suspension or delay in the repayment of debts or obligations.
Case Example:
Amid financial difficulties exacerbated by external events, JKL Corp in Cardiff secured a 6-month moratorium on its bank loan repayments.
N
- Negative Pledge Clause
- A clause typically found in loan agreements prohibiting the borrower from creating any lien or other security interest over its assets, without the lender’s consent.
Case Example:
In a £1 million loan agreement in Liverpool, a negative pledge ensured the borrowing company couldn’t use its main premises as collateral for another loan.
- Negotiation
- The process of discussing terms to potentially settle a debt outside of court.
Case Example:
After months of negotiation, a Cardiff supplier agreed to reduce an outstanding invoice by 20% in return for prompt payment, avoiding litigation over the £50,000 debt.
- Nominal Defendant
- An individual or entity named as a defendant in a case, despite not having a significant role or bearing any liability in the matter.
Case Example:
In an Exeter case about a road accident involving multiple parties, a passenger was named as a nominal defendant, even though they had no responsibility for the event.
- Nominee
- An insolvency practitioner responsible for reviewing a proposed Individual Voluntary Arrangement (IVA) before it is presented to creditors.
Case Example:
Before Mr. Walker’s IVA proposal in Watford was presented to his creditors, it was first reviewed and approved by a nominated insolvency practitioner.
- Nominee’s Report
- A report prepared by a nominee (insolvency practitioner) detailing their opinion on the viability and fairness of a proposed voluntary arrangement.
Case Example:
Before the creditors’ meeting, the nominee’s report for STU Ltd in Bristol indicated that the proposed CVA was feasible and in the best interests of all parties.
- No-Fault Bankruptcy
- A bankruptcy procedure where the debtor is not held morally or legally responsible for their insolvency.
Case Example:
Susan, impacted by unexpected medical bills, filed for no-fault bankruptcy, acknowledging that her financial difficulties were beyond her control.
O
- Official Receiver
- An Officer of the court and civil servant employed by the Insolvency Service, the Official Receiver plays a key role in bankruptcy and compulsory liquidation procedures. Their role is to take control of the debtor’s property and realise it to pay off creditors.
Case Example:
After a Norwich-based company went bankrupt with debts of £800,000, the Official Receiver investigated the company’s financial affairs to determine if any wrongdoing had occurred.
- Order for Sale
- A court order directing that a property be sold, often to satisfy a judgment debt.
Case Example:
After Mr. Thompson from Oxford failed to pay a £150,000 debt even after a court judgment, an order for sale was issued against his house.
- Order to Obtain Information
- This is a court order that requires the debtor to provide information about their finances. It can be crucial for creditors in assessing what recovery action to take. The debtor is legally obligated to attend a court hearing and may face prison time for non-compliance.
Case Example:
Unsure about the assets and earnings of a debtor in Southampton, a creditor obtained this order, making the debtor disclose his financial details.
- Out-of-Court Settlement
- An agreement between disputing parties to resolve their disputes without proceeding to a court hearing.
Case Example:
Two companies in Newcastle, in conflict over a patent worth £700,000, reached an out-of-court settlement, saving time and legal fees.
- Outstanding Debt
- The total amount of debt that remains unpaid by the borrower.
Case Example:
A company in Cambridge had an outstanding debt of £100,000 from unpaid invoices spanning six months.
- Overdrawn Directors Loan Account
- When a director owes money to the company, resulting from withdrawals that exceed their contributions or salary.
Case Example:
The director of StartTech Ltd in Norwich had an overdrawn director’s loan account of £10,000 after drawing funds for personal use beyond what the company owed him.
- Office Holder
- A person appointed to manage the insolvency proceedings, like administrators, liquidators, or trustees.
Case Example:
In the insolvency of ABC Tech Ltd in Bristol, the office holder was tasked with selling assets, paying creditors, and finalising all affairs.
- Official Receiver
- A government official in the UK responsible for dealing with bankruptcy and company liquidation.
Case Example:
Upon declaring bankruptcy, Mrs. Taylor in Sheffield was interviewed by the official receiver to provide details about her assets and debts.
- Onerous Property
- Property or contracts that might cause a loss to the insolvency estate, such as lease agreements where the rent is higher than the market rate.
Case Example:
MNO Ltd’s rented warehouse in Belfast, with high rents and long-term lease obligations, was deemed onerous property during its insolvency proceedings.
P
- Part 36 offer
- In UK civil litigation, an offer to settle a dispute made on a without prejudice basis. If the offer is rejected and the offeror obtains a more favourable judgment, there might be cost implications for the offeree. There is a relevant period of 21 days for the opponent to accept the Part 36 offer and the offer must not be withdrawn within that period. It can be left open for acceptance until trial as is usually the case. Part 36 offers are a valuable and important tool that can be used to apply pressure and offers various benefits such as enhanced costs (indemnity basis), enhanced interest and penalty of 10%.
Case Example:
Mrs. White in Nottingham made a Part 36 offer to settle at £40,000. When this was declined and she won £50,000 at trial, the defendant had to bear additional costs.
- Payment Plan
- An arrangement between the creditor and debtor, detailing how a debt will be repaid over time.
Case Example:
Facing difficulty in repaying a £20,000 loan, Mr. Jackson in Glasgow agreed on a payment plan with his bank, spreading the repayments over 24 months.
- Payment Protection Insurance (PPI)
- An insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabled, loses a job, or faces other circumstances that may prevent them from earning income to service the debt.
Case Example:
Mrs. Evans in Wales took out a PPI when she secured a £10,000 loan. When she lost her job, the PPI covered her monthly loan repayments for a year, ensuring her credit score was not impacted.
- Personal Guarantee
- A commitment by an individual (usually a company director) to be personally responsible for a company’s debt should the company fail to pay.
Case Example:
To secure a £150,000 loan for his startup in Manchester, Mr. Johnson provided a personal guarantee. When the business failed, he became personally liable for repaying the debt.
- Personal Insolvency
- A situation in which an individual’s liabilities (debts) exceed their assets and they are unable to pay back what they owe.
Case Example:
After a series of unfortunate investments and medical emergencies, Mr. Smith in London found himself £300,000 in debt, leading to his personal insolvency.
- Possession Order
- A court order that allows a lender to take possession of a property when the borrower has failed to keep up with repayments.
Case Example:
After Mr. Wallace in Liverpool defaulted on his mortgage payments for 9 months, the bank sought a possession order to reclaim the property.
- Pre-Action Protocol
- Before taking a case to court, the creditor and debtor are required to follow the Pre-Action Protocol which is incorporated into the Civil Procedure Rules, which is a set of steps and correspondence to try to resolve the issue without court intervention.
Case Example:
Before initiating a claim at Court over a £50,000 contractual dispute, a company in Bristol followed the pre-action protocol, which included sending a Letter Before Action to set out the legal and factual basis of the claim, and see if matters could be resolved without court proceedings.
- Pre-Action Protocol for Debt Claims
- Specific guidelines within the Civil Procedure Rules set out for when claiming payment of a debt from an individual; it must not be a debt incurred during the course of business.
- Preferential Creditor
- In insolvency proceedings, a creditor who is entitled to be paid before other unsecured creditors.
Case Example:
During the liquidation of a company in Birmingham, the employees, being preferential creditors, received their owed salaries before other suppliers were paid.
- Priority Debt
- Debt that is considered more urgent than other debts, usually because not paying it can have serious consequences like home repossession.
Case Example:
Mrs. Brown in Sheffield prioritised her mortgage arrears, a priority debt of £5,000, over her credit card debt to avoid potential repossession of her home.
- Proof of Debt
- A formal document submitted by a creditor in insolvency proceedings to state the amount owed by the debtor.
Case Example:
A company in London submitted a proof of debt for £20,000 to the liquidator during the insolvency proceedings of another company.
- Particulars of Claim
- A detailed written statement that outlines the facts supporting a claimant’s case.
Case Example:
In her lawsuit against a negligent contractor, Mrs. Smith included particulars of claim which described how the contractor failed to adhere to the agreed standards.
- Preference
- A transaction that puts one creditor in a better position than other creditors in the event of insolvency.
Case Example:
A company in Watford repaid a loan to its director’s brother just two weeks before declaring bankruptcy, possibly indicating a preferential transaction that disadvantaged other creditors.
- Provisional Liquidator
- A temporary liquidator appointed to safeguard a company’s assets between the presentation of a winding-up petition and the making of a winding-up order.
Case Example:
Concerned about potential asset dissipation at DEF Holdings Ltd, the court appointed a provisional liquidator until the final liquidation decision was made.
- Proxy
- A person authorised to act on behalf of another, especially in the context of voting rights in a meeting.
Case Example:
Mr. Evans in Bristol, unable to attend the annual shareholders’ meeting, assigned Mr. Lee as his proxy to vote on his behalf.
- Proxy Form
- A document that authorises another person to represent and vote on behalf of the shareholder in company meetings.
Case Example:
Mrs. Green in Chelsea could not attend the annual meeting of shareholders, so she filled out a proxy form allowing her son to vote on her behalf.
- Partnership
- A business arrangement where two or more individuals collaborate and share the profits and liabilities.
Case Example:
Sarah and Paul set up a partnership to run a café in Birmingham, sharing the profits equally.
- Pay As You Earn (PAYE)
- The system used by HMRC to collect Income Tax and National Insurance from employment.
Case Example:
John’s employer deducts tax from his monthly salary using the PAYE system, ensuring he pays the correct tax throughout the year.
- Pension Fund
- A pool of funds collected by an organization to finance its members’ retirements.
Case Example:
A copy has a pension fund that ensures all its employees have a retirement plan in place.
- Public Limited Company
- A type of company that can offer its shares to the general public and has limited liability. These shares can be traded on the stock market.
Case Example:
Major companies like Tesco PLC offer shares to the public and are traded on the London Stock Exchange.
Q
- Quasi-Security
- An arrangement where a lender gains some protection, like a security interest, but without an official charge or lien over assets.
Case Example:
A Sunderland retailer provided its supplier a right to claim unsold goods as a quasi-security for unpaid invoices.
- Qualifying Floating Charge Holder
- A creditor holding a floating charge (usually a bank), which qualifies them to appoint an administrator if a company defaults on its payments.
Case Example:
PQR Bank in Liverpool held a qualifying floating charge over STU Ltd’s assets and appointed an administrator when the company became insolvent.
R
- Receivership
- A legal process where an external party (the receiver) is appointed to recover debts on behalf of a secured creditor.
Case Example:
When a Newcastle hotel could not repay its bank loan, the bank initiated receivership, and a receiver was appointed to manage the hotel’s operations and ensure the bank’s interests were protected.
- Recovery Action
- Steps taken to recover debt, which can include sending letters, making telephone calls, and taking court action.
Case Example:
Owing £30,000 to multiple creditors, Mr. Hughes in Belfast faced recovery actions, including court judgments and bailiff visits.
- Recovery Agency
- An agency specialising in recovering outstanding debts on behalf of another party.
Case Example:
With £100,000 in uncollected dues, a gym in Coventry hired a recovery agency to handle the debt collection process.
- Repayment Holiday
- A period during which a borrower is allowed to temporarily stop making repayments on a loan.
Case Example:
Struggling financially due to a family emergency, Mrs. Jenkins in Cardiff was granted a 3-month repayment holiday on her personal loan, helping her manage her finances.
- Repossession
- The act of a lender taking back possession of an asset (like a property or vehicle) when the borrower defaults on their repayments.
Case Example:
After Mr. Morris in Swansea missed 12 car finance payments, the finance company initiated repossession, taking back the car.
- Retention of Title
- A clause in a contract that allows the seller to retain legal ownership of goods until they have been paid for in full.
Case Example:
GHI Electronics Ltd in Coventry supplied TVs to a retailer, but when the retailer went insolvent without paying, GHI invoked the retention of title clause to reclaim the TVs.
S
- Secured Creditor
- A creditor who holds a security interest, such as a mortgage or charge, over an asset of the debtor. This gives them a preferential right over the proceeds from the sale of that asset.
Case Example:
After factory in Birmingham became insolvent, its bank, a secured creditor with a mortgage over the factory premises, recovered £500,000 from the sale of the property.
- Set Aside Application
- A legal request to a court to cancel or revoke a judgment or order, often due to a lack of knowledge about the original proceedings.
Case Example:
Mr. Green in Newcastle applied to set aside a default judgment of £10,000 as he had not received the initial court papers.
- Small Claims Court
- Small Claims Court handles less complex debt recovery cases, usually where the claim is for a small amount. This court provides a quicker and less expensive way for creditors to pursue debts.
Case Example:
Ms. Thompson in Brighton pursued a claim in the small claims court to recover a £2,000 debt from a contractor who did not complete work on her home.
- Small Claims Track
- One of the paths for civil claims in the UK court system specifically for lower-value claims, usually those under a certain threshold.
Case Example:
A dispute over a £3,500 unpaid invoice between a plumber and homeowner in Southampton was allocated to the small claims track due to its value.
- Solicitor’s Demand Letter
- A formal letter sent by a solicitor on behalf of their client demanding payment or another form of restitution for a debt.
Case Example:
A bookshop in Oxford received a solicitor’s demand letter asking for immediate payment of a £4,000 overdue account, or face legal action.
- Statutory Demand
- A Statutory Demand is an official demand for payment issued by a creditor. Failure to respond within 21 days may result in the commencement of bankruptcy or winding-up proceedings. It is often used as a strong-arm tactic to force debt repayment. The debtor will have 18 days to apply to the Court to set aside the statutory demand if it is not withdrawn by the creditor. A statutory demand is a precursor to a petition at Court.
Case Example:
After months of chasing an unpaid £15,000 invoice, a vendor in Cardiff served a statutory demand on the debtor company, signalling their intent to escalate the matter if not paid.
- Strike Out Application
- A request to the court to remove a claim or a defence from the court proceedings, often because it’s deemed to have no real prospect of success.
Case Example:
In a Liverpool property dispute, one party made a strike-out application against the other’s defence, claiming it was irrelevant and without merit.
- Summary Judgment Application
- A legal procedure where one party seeks a judgment in their favour without a full trial, usually when they believe there is no real prospect of the other party successfully defending the claim.
Case Example:
In a London dispute over a clear breach of contract worth £25,000, the aggrieved party applied for a summary judgment, arguing the defendant had no valid defence.
- Schedule of Loss
- A document detailing the financial losses being claimed in litigation.
Case Example:
After a commercial dispute, ABC Ltd in Manchester submitted a schedule of loss, itemising £120,000 in direct losses and £45,000 in consequential losses.
- Statement of Affairs
- A detailed document outlining the assets and liabilities of an insolvent individual or company.
Case Example:
Facing bankruptcy, Mr. Brown in Wolverhampton provided a statement of affairs showing assets worth £50,000 and debts totalling £150,000.
- Supervisor
- An insolvency practitioner appointed to oversee the implementation of an Individual Voluntary Arrangement (IVA) or Company Voluntary Arrangement (CVA).
Case Example:
Following a successful CVA proposal by a company in Leeds, Mr. Williams, an insolvency practitioner, was appointed as the supervisor to ensure monthly repayments were made to creditors.
- Statutory Interest
- Interest payable by law on outstanding debts or judgments.
Case Example:
VWX Ltd in Nottingham owed £100,000. Due to late payment, they had to pay statutory interest of 8% per annum on the outstanding amount.
- Shadow Director
- An individual not formally appointed as a director but who gives instructions on which the directors of a company are accustomed to act.
Case Example:
Mrs. Brown in Leeds was not an official director of the company but had significant influence over its operations and decisions, making her a shadow director.
- Shareholder
- An individual or institution that legally owns shares of stock in a public or private corporation.
Case Example:
George owns 100 shares in GHI Ltd, making him a shareholder and entitling him to a portion of the company’s profits.
- Sole Trader
- An individual who owns and operates their own business without forming a company or partnership.
Case Example:
Mike runs a bakery in Leeds as a sole trader, meaning he is solely responsible for all the business’s decisions, profits, and liabilities.
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- Third-Party Debt Order
- This order freezes a debtor’s bank account or any money owed to the debtor by a third party. Once the account is frozen, the court decides if the money can be used to pay off the debt.
Case Example:
To recover a court judgment of £20,000, a creditor in Bristol obtained a third-party debt order against the debtor’s bank, ensuring the debtor’s account was frozen until the debt was settled.
- Trading whilst Insolvent
- The act of continuing to conduct business and incur debt when a company is unable to pay its debts as they fall due.
Case Example:
TechBizz Ltd. in Manchester continued accepting orders and incurring liabilities of £200,000 even when they were insolvent, risking legal consequences for its directors.
- Transaction at Undervalue
- A transaction in which an asset is sold or transferred for significantly less than its true value, often scrutinised in insolvency proceedings.
Case Example:
Weeks before declaring bankruptcy, Mr. Jones in Nottingham sold his £100,000 property to a friend for just £20,000. This was later challenged as a transaction at undervalue.
- Trial
- A formal examination of evidence by a judge to determine the outcome of a civil or criminal case.
Case Example:
A landmark case in London, involving a complex business merger and £5 million at stake, went to trial after months of pre-trial procedures.
- Trustee
- An individual or firm appointed to hold and manage assets for the benefit of others, especially in bankruptcy cases.
Case Example:
Upon Mr. Thompson’s bankruptcy declaration in Bristol, a trustee was appointed to manage and liquidate his assets to repay creditors.
- Trading Out
- A strategy wherein a financially distressed company tries to trade its way out of financial difficulty by generating sufficient revenues and profits.
Case Example:
MNO Ltd faced cash flow issues but decided to trade out by securing new profitable contracts instead of seeking insolvency procedures.
- Turnaround Practitioner
- A professional specializing in assisting distressed companies to become profitable again.
Case Example:
When PQRS Ltd faced declining sales and mounting debts, they hired a turnaround practitioner to help devise a new business strategy.
- Turnover
- The total sales generated by a business over a specific period, usually a fiscal year.
Case Example:
In 2022, TUV Ltd reported a turnover of £2 million, reflecting its total sales for the year.
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- Undervalue Transaction
- A transaction in which an asset is transferred or sold for a price significantly lower than its actual market value, especially if done to disadvantage creditors. Often scrutinised in insolvency proceedings.
Case Example:
Mrs. Smith in Liverpool, facing impending bankruptcy, sold her house worth £300,000 to her brother for just £50,000. This sale was later investigated as an undervalue transaction.
- Undischarged Bankrupt
- A person who has been declared bankrupt but has not yet been released from the restrictions and obligations of bankruptcy.
Case Example:
Mr. Allen in Bristol, having been declared bankrupt in 2020 with debts of £400,000, remained an undischarged bankrupt till 2022, limiting his financial and business activities.
- Unsecured Debt
- Debt that is not protected by a guarantor or collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms of repayment.
Case Example:
Ms. Hughes in Bristol took out a personal loan for £20,000. Since she did not offer any asset as collateral, it is considered an unsecured debt.
- Unfair Prejudice Petitions
- A legal remedy for shareholders if they believe they are being treated unfairly or prejudicially by the conduct of the company.
Case Example:
A minority shareholder in CleanEnergy Ltd in Exeter felt decisions favoured majority shareholders, leading him to file an unfair prejudice petition.
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- Variable Rate Agreement
- A loan or credit agreement where the interest rate can change over time, typically based on an underlying benchmark interest rate.
Case Example:
Mr. Wilson’s £150,000 mortgage in Leeds had a variable rate that fluctuated based on the Bank of England’s base rate.
- Variation Order
- A court order that amends a previous order or judgment.
Case Example:
After initially being ordered to pay £1,000 per month, a debtor in Birmingham had it reduced to £700 per month after the court issued a variation order based on his changed financial circumstances.
- Vesting Order
- A court order that transfers ownership or property rights from one party to another.
Case Example:
Due to unresolved inheritance disputes in Newcastle, a vesting order was issued, transferring ownership of a £250,000 house from the deceased’s estate to the rightful heir.
- Voidable Transaction
- A transaction that can be declared invalid by one of the involved parties due to certain defects or undue influences, even if it appeared valid initially.
Case Example:
A business sale in York was later deemed a voidable transaction when it was discovered that one party had been significantly misled regarding the company’s debts.
- Voluntary Arrangement
- An agreement between a debtor and their creditors to repay debts over time, often at a reduced amount or rate.
Case Example:
Facing debts of £70,000, Mr. Patel in Coventry proposed a voluntary arrangement, agreeing to repay £40,000 over five years.
- Voluntary Charge
- An agreement where a property owner willingly offers their property as security for a debt.
Case Example:
Mrs. Clark in London, needing a £50,000 loan but wary of high interest rates, provided a voluntary charge on her property to secure a better rate.
- Voluntary Liquidation
- A process initiated by a company’s shareholders or directors to wind up the company’s affairs and distribute its assets.
Case Example:
TechCorp Ltd in Belfast, facing declining sales, opted for a voluntary liquidation to pay off creditors and close the business.
- Validation Order
- In the event that a winding up petition is presented, any dispositions or payments made by the company are void unless authorised or approved by the Court. A Validation Order is an order made by an application on behalf of the company that validates specific payments or transactions made by a company after a winding-up petition has been presented against it.
Case Example:
After receiving a winding-up petition, YZ Ltd obtained a validation order to pay its employees, ensuring they received their salaries despite the company’s financial challenges.
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- Winding-up Petition
- A winding-up petition is a formal legal request submitted to the court by a creditor seeking to close a business that has failed to settle its debts. This action is generally seen as a last resort and follows multiple unsuccessful attempts at debt recovery.
Case Example:
After FashionCo Ltd. in Brighton failed to pay a £200,000 debt, its largest supplier filed a winding-up petition.
- Without Prejudice
- A term used in legal letters and negotiations to indicate that what follows cannot be used as evidence in court.
Case Example:
In a London property dispute, both parties exchanged “without prejudice” offers, trying to reach a settlement before a court hearing.
- Witness Statement
- A written account from a witness detailing their evidence in relation to a legal case.
Case Example:
For a slip and fall case in Manchester, Ms. Walker provided a witness statement detailing how she saw the plaintiff trip over a protruding tile.
- Writ
- A formal written order issued by a court or other legal authority.
Case Example:
After winning a case in Norwich, the claimant was issued a writ of possession to reclaim his property from the occupant.
- Write-off
- The act of acknowledging that a portion or the entirety of a particular asset or debt is unlikely to be recovered or repaid and thus, removing it from an account in the books.
Case Example:
After several failed attempts at collecting a debt of £5,000 from a debtor, a company in Oxford decided to write-off the debt, acknowledging they might never retrieve it.
- Wrongful Trading
- An offence where directors of a company continue trading when they should have known there was no reasonable prospect of avoiding insolvent liquidation.
Case Example:
TechStart Ltd in Cambridge kept taking customer orders and incurring more debts, despite evident financial troubles. When it went into liquidation, the directors were investigated for wrongful trading as they continued operations long after it was clear they were insolvent.
- Wrongful Trading
- When company directors continue to trade and incur debts despite knowing (or should have known) there was no reasonable prospect of avoiding insolvency.
Case Example:
The directors of PQR Ltd in Devon continued to take on new contracts and debts even when it was clear the company was insolvent. They might be accused of wrongful trading.
- Walking Possession
- An agreement whereby a bailiff establishes control over goods but leaves them in the debtor’s possession until they are sold or a debt is paid.
Case Example:
A bailiff in Manchester took walking possession of a debtor’s machinery, allowing him to continue his operations, provided the debt was settled within an agreed timeframe.
- Warrants of Execution
- A legal document that authorizes a bailiff to seize and sell a debtor’s goods to recover money owed.
Case Example:
Due to Mr. Smith’s unpaid council tax in Watford, the court issued a warrant of execution, leading bailiffs to seize and auction his car.
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- Zero Asset Case
- A situation in bankruptcy proceedings where the debtor possesses no significant assets which can be liquidated for the benefit of the creditors.
Case Example:
Mr. Thompson in Cardiff filed for bankruptcy, but upon investigation by the insolvency practitioner, it was determined that he had no assets or properties of value to sell off. His case was labelled a zero-asset case, meaning creditors were unlikely to recover any of their money.
- Zero Balance
- An account status where the account neither owes nor is owed any money.
Case Example:
After repaying the final instalment of her £15,000 loan, Ms. Richardson in Sheffield received a statement showing a zero balance, indicating she had no remaining debt to the bank.
