The Local Authority Insolvency Jargon Buster

The world of insolvency can be, at best, confusing for the uninitiated. The various fields of restructuring and recovery are littered with technical terms, some straightforward and some completely baffling. This simple-to-use A-Z guide should act as a handy tool for all recovery staff.

A

Administration

The company's assets are placed under the control of an administrator who is a licensed insolvency practitioner. The aim is to either save the business or achieve a better realisation of assets on behalf of creditors than if the company went into liquidation without previously being in administration.

Administration order

A county court order to arrange and administer an individual's payment of debts. The debts must not exceed £5,000.

or

A court order appointing an administrator to take control of a company. The administrator must be a licensed insolvency practitioner. A company can also be put into administration if a floating charge holder, or directors of the company itself, file the necessary notice at the court.

When an administrator trades a company in administration, the business rates are due as an expense of the administration for the period of trading.

Administrative receivership

An enforcement remedy which floating charge creditors use when a company breaches the terms of its borrowing. The floating charge creditor may appoint an administrative receiver (who must be a licensed insolvency practitioner) to recover the money owed to the floating charge holder.

Many companies give a floating charge to banks as security for their borrowing. Administrative receivers have extensive powers to deal with the charged assets. The administrative receiver effectively takes over management of the business from the directors and continues to trade prior to selling the business and/or assets.

However, an administrative receiver can only be appointed in relation to a charge granted prior to 15 September 2003. As such, receiverships are a dying breed.

Annulment

The process whereby the court revokes a bankruptcy order. There are two grounds for an annulment.

'Payment in full': all bankruptcy debts, costs and expenses have been paid.

'Ought not to have been made': there was some technical reason why the bankruptcy order should not have been granted in the first place, e.g. if the debt was under £750.

B

Bankrupt/Undischarged bankrupt

A person declared insolvent by the court. Bankruptcy usually lasts for a maximum of one year unless the debtor has not co-operated with the official receiver and/or the trustee in bankruptcy.

Bankruptcy order

A court order that makes an individual bankrupt. A bankruptcy order can only be made on a debt of £750 or more. The order imposes certain restrictions on the bankrupt e.g. they cannot be a director of a limited company.

Bankruptcy restriction order/undertaking

Bankruptcy restriction orders (BROs) are usually applied when the official receiver believes a bankrupt may have been dishonest or reckless in his/her spending. BROs can last for periods of 2 to 15 years. In most cases the bankrupt agrees to the terms that would be imposed by an order. This is called a bankruptcy restriction undertaking (BRU) and covers the same period of time as the BRO.

C

Charging order

A court...