Administration is a form of insolvency that looks to rescue a failing company rather than liquidate and dissolve. Upon the appointment of an administrator, the administration will act as a rescue mechanism to allow the company to try and recover and come out of insolvency.

An Administration Order is the order of a Court appointing an Administrator to control the affairs of a company at the request of the company, directors or a creditor where that company is or is unlikely to become insolvent.

An Administrative Receiver is an insolvency practitioner appointed by a creditor who has security over all (or substantially all) of the assets of a company (a floating charge holder). An Administrative Receiver may carry on the company’s business and sell off the assets of the company as he sees fit in order to discharge the debts to the floating charge holder and other secured and preferential creditors.

Administrative Receivership is the process when an administrative receiver is appointed to deal with the affairs of a company. This was effectively withdrawn as a remedy by way of s72a of the Insolvency Act 1986. Only in limited circumstances can the holder of a floating charge created on or after 15 September 2003 now appoint an Administrative Receiver.

An Administrator is the insolvency practitioner appointed pursuant to an administration order to deal with an insolvent company’s affairs. An administrator may carry on the company’s business and/or realise any of the company’s assets with a view to rescuing the company as a going concern or achieving a better result for creditors than would be possible with a liquidation.

During a court claim, either party may make specific applications to the court to deal with interim issues. These can include applications to set aside judgment, for summary judgment, for specific disclosure etc. Generally, upon receiving an application, the court will either deal with it on paper (and make a decision there and then) or order a hearing be listed to deal with that specific issue.

Arrears are monies owed by debtors that are overdue for payment.

A method of enforcement of a judgment. A creditor is entitled to ask a court to order that an employer deduct a set amount from the debtor’s wages until the debt has been discharged. Does not apply to sole traders.

Average Days Delinquent is also referred to as your “Delinquent DSO”. Your ADD calculates the average time from your invoices due date to the date you get paid (the average days invoices are past due) Average Days Delinquent helps evaluate your overall collection performance and can be calculated by segments of your customer base and on individual customers. “Average Days Delinquent = DSO – Best Possible DSO” Do not confuse Average Days Delinquent with Average Days to Pay which is based on the historical information of the actual closed invoice while ADD is based on a snapshot in time.

Average Days to Pay is a calculation used to give an indication of how long a customer takes to pay their invoices. This is based on historical information once invoices have been closed. Example: Invoice #1 paid 25 days late Invoice #2 paid 20 days late Invoice #3 paid 15 days late Therefore, cumulatively all three invoices are 60 days late. Divide this figure by 3 and you can see that the average days to pay for this customer is 20 days.

An employee of the County Court, the bailiff can be employed by a creditor to take away a debtor’s possessions in satisfaction of a judgment debt.

Bankruptcy is a form of insolvency affecting individuals and partnerships. It can be initiated by either the individual or by his creditors when it becomes apparent he cannot pay his debts as they fall due. Once an individual has been declared bankrupt by way of a court order, his affairs will vest in a Trustee in Bankruptcy (TiB). A TiB may be the Official Receiver or a licenced insolvency practitioner appointed by the Secretary of State or by creditors. Bankruptcy generally lasts 12 months.

Before an individual can be discharged from his bankruptcy, he must follow certain rules which are defined as ‘restrictions’. If the Official Receiver determines that the debtor has breached these rules, he may request that a Bankruptcy Restriction Order is made against the debtor. If the debtor breaches the BRO, he can be prosecuted amongst other things.

Best Possible Days Sales Outstanding (DSO) indicates the “best” possible amount of days that you can collect your invoices in. This measure looks at your current accounts receivables (the amount of your accounts receivables that are within your credit terms i.e. not overdue) not your total accounts receivables balance. Below is the calculation you need to work out your best possible DSO: “Current Receivables / Credit Sales for Period x Number of Days in Period”

Charging orders are a common method of enforcement of a judgment where the debtor owns property. A successful application for a ‘charge’ against the debtor’s property will turn the unsecured judgment debt into a secured debt. A charging order allows a creditor to make an application for an order for sale of the property, though the granting of such is at the discretion of the court. If the court orders the sale, the creditor will sit behind any other owner of a charge on the property (normally the mortgagee) and will be paid after the previous charge holder’s debts have been paid in full.

The Civil Procedure Rules (CPR) are a set of rules that govern the civil procedure used by courts in civil cases in England and Wales.

A person or other entity initiating a court claim. Formerly known as a plaintiff.

The Collection Effectiveness Index (CEI) was developed by the Credit Research Foundation. The use of the CEI is on the increase by credit managers here in the UK and abroad. Essentially, your CEI is the percentage of receivables closed or paid in a given time period. CEI measures the quality of your collection efforts over time and gives you a % result. The closer to 100% – the more effective your collection efforts. The CEI calculation is: “Start of period Receivables + Periods Invoice Revenue – End of Period total Receivables Work the above out and then divide the result by; Start of period Receivables + Periods Invoice Revenue – – End of Period Current Receivables Then x 100 (Then times the figure by 100)”

Companies House is the registrar for all UK companies and is an executive agency of the UK Government.

A company is a legal entity controlled by identifiable persons which exists for an industrial or commercial purpose. All UK companies are registered at Companies House.

The Company Directors Disqualification Act 1986 is a piece of English legislation that deals with the disqualification of company directors in certain cases of misconduct.

A Company Voluntary Arrangement or CVA is a voluntary procedure by which an insolvent company submits a plan to its creditors and shareholders that will act in satisfaction of the debt it owes.

A composition is an agreement between a debtor and his creditors whereby the debtor agrees to pay a prescribed sum to his creditors in full satisfaction of the debt owed.

A Compulsory Liquidation occurs where the court orders the liquidation of an insolvent company.

Otherwise known as the “Report of the Review Committee on Insolvency Law and Practice”, the Cork Report discussed the social and financial implications of insolvency and is said to have been a substantial base for the Insolvency Act 1986. The name of the report derives from the chair: Sir Kenneth Cork.

The County Court is the first level court system within England and Wales that deals with disputes with unlimited financial jurisdiction. County Courts do not share the same boundaries as counties and instead can cover disputes involving parties located over a large geographical area.

A court-appointed receiver is a person appointed by the court to take charge of the assets of a company. This action tends to be taken when the assets are subject to a legal dispute and there is a risk that the assets may be destroyed or dissipated. The court-appointed receiver will ensure that the assets are kept safe until the dispute has been resolved.

A person or other entity who is owed monies.

The Creditors’ Committee is a group of people (at least 3; not more than 5) appointed in an insolvency scenario generally made up of secure and unsecure creditors. The Creditors’ Committee represents the interests of all of the creditors with regards to supervising and assisting the administrator or trustee in bankruptcy in their duties and eventual remuneration.

A Creditors’ Voluntary Liquidation (CVL) is a procedure whereby the shareholders of a company decide to put the company into liquidation. A CVL only applies to the insolvency of a limited company. In a CVL, the assets of the company are sold and the realisation of this is distributed between the creditors before the company is dissolved.

A company’s average payable period. The calculation is as follows: “Accounts Payable / Cost of Sales x number of days in period.”

Days Sales Outstanding or DSO is a measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivables. A high DSO number shows that a company is selling its product or service to customers on credit terms (for example 30 days, 60 days etc.) and taking longer to collect money. Days sales outstanding is calculated as: “DSO = Accounts Receivable / Invoiced Sales X days in period” Due to the high importance of cash flow in running a business, it is in a company’s best interest to collect outstanding receivables as quickly as possible. By quickly turning sales into cash, a company has the chance to put the cash to use again – ideally to reinvest and make more sales. The DSO can be used to determine how effective (or ineffective) a company is at bringing its outstanding invoices in. For most businesses, DSO is looked at either quarterly or annually.

A debenture is a long-term loan that is secured against a company’s assets. The term most commonly denotes a document which creates a fixed charge over the assets which are not traded in the ordinary course of business, and a floating charge against the remainder of the company’s assets. The creditor who is granted a debenture is given similar rights to a mortgagee.

Debt Recovery is the process by which a creditor will try to recover monies owed to them by a debtor. There are many different methods of recovering debts, dependant on whether the creditor and/or debtor is an individual, company or other organisation.

Debt restructuring is a process that can take place when a company is unable to pay its debts and would like to consolidate what it owes and adjust terms so that the payments are more affordable going forward.

A deed of arrangement is an agreement between an insolvent individual and his creditors to avoid bankruptcy. The deed will allow the debtor to come to terms with his creditors in satisfaction of their debts. This agreement is outside formal bankruptcy procedures and governed by the Deeds of Arrangement Act 1914.

A person or other entity defending a court claim.

Director’s duties and liabilities are the rules and regulations that a director must comply with once appointed. These include rules governing a director’s conduct, his duty to the company and his duty to the company’s shareholders.

Disqualification is a consequence a director may face if he breaches his duties as a director. A disqualification order may be made by the court.

A Dunning Cycle is a credit control process implemented to ensure a targeted group of accounts responds accordingly and within specific timescales. As a deadline approaches, the tone of the letters and calls used becomes harsher and may result in a formal demand when a deadline for payment has expired.

Enforcement is a process to elicit the payment of a Judgment debt. Enforcement can include charging orders, attachment of earnings, third party debt orders and insolvency proceedings.

Under s244 of the Insolvency Act 1986, either an administrator or liquidator can apply to court to set aside an extortionate credit transaction. A transaction is classified as ‘extortionate’ if, in providing credit, the lender’s terms require ‘grossly exorbitant payments’ to be made and is goes against the principles of fair dealing.

Where a creditor has ‘loaned’ monies to a company, it may wish to take a “fixed charge” over a specific asset. The asset is then “signed over” to the lender so the debtor cannot do anything with the asset without the permission of the lender.

Similar to fixed charges, a Floating Charge is a security afforded to a lender over assets that are constantly changing in identity and value (such as stock, cash, fixtures and fittings etc). Floating Charges are mainly associated with companies and not individuals. The company can continue to use the general assets. Should they default on their loan obligations, the floating charge will crystallise at that point and the lender’s floating charge will, in essence, become fixed.

Fraudulent Trading is the deliberate act by the director(s) of deceiving creditors/lenders by carrying on business where there is no intent to pay. If a person is found liable of fraudulent trading, he can face imprisonment.

A freezing order (formally known as Mareva Injunction) is  a court order that prevents parties disposing of their assets during legal proceedings.

A guarantee is a commitment that a third party will repay a debt in the event that the original borrower fails to do so.

Her Majesty’s High Court of Justice in England is one of the senior courts of England and Wales. The High Court is a court of unlimited civil jurisdiction and comprises three separate divisions: the Queen’s Bench, Chancery and the Family Division. The High Court generally deals with higher value claims than the County Court.

A private individual or company, licenced to work under High Court Writs to recover money and possessions from a debtor. Similar to a bailiff but can only act on debts of £600 or more.

An Individual Voluntary Arrangement (IVA) is a legally binding arrangement supervised by a licensed Insolvency Practitioner. The purpose of an IVA, similar in nature to a CVA, is to enable an individual to reach a compromise with his creditors and avoid the consequences of bankruptcy.

Insolvency is the condition of having insufficient assets with which to discharge debts and liabilities. In short, the debtor is unable to pay his debts as they fall due.

An Insolvency Practitioner is an individual who is licensed and authorised to act in relation to the affairs of an insolvent individual, partnership or company.

The Insolvency Rules 1986 are a statutory instrument that sets out the detailed working procedures for the provisions of the Insolvency Act 1986.

The Insolvency Services Account is an account held by the Bank of England which all monies relating to a bankruptcy or company insolvency pass through.

An interim order is an order that will stay in place until it is either made final at a hearing or set aside (by the court or by consent). An example of an interim order relates to the process for obtaining a charging order. Upon application (which is made without notice to the debtor), the court will grant an interim order and set down a hearing for the final order (if the debtor contests the application). At the final hearing, the interim order will either be made final or set aside.

A judgment is a final decision by a court or other tribunal.

The geographical area that a given set of laws govern. In a contract, parties will generally agree which court system will oversee any dispute that may arise. This does not have to be the country/area that the contract is performed or the parties based.

Her Majesty’s Land Registry is the Government agency responsible for the ownership of land and property in England and Wales.

The Late Payment of Commercial Debts (Interest) Act 1998 is a piece of legislation that was introduced to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debts. It was amended on 7 August 2002 to incorporate the features of the European Directive 2000/35/EC on combating late payment in commercial transactions. Under the revised legislation, businesses can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of statutory interest.

Letter before action (also known as a letter before claim) is generally seen as the last letter sent by a creditor to a debtor before legal action is taken to recover a debt.

A Licensed Insolvency Practitioner (IP) is a professional individual licenced to act for insolvent individuals and businesses. IP’s can advise on, and undertake appointments, in all formal insolvency procedures.

Lien is a right of possession in property that can be retained until a debt has been discharged. A common example of this is car repairs. A garage, who has carried out repair work on a car, can exercise a lien over that car and refuse to release it to the owner until the repair bill has been paid in full.

A Limited Liability Partnership, or LLP, is a partnership that limits the liabilities of the partners. It is similar in make up to a company.

A Liquidation Committee is a small group of representatives appointed by the creditors, to assist the liquidator in conducting the liquidation of an insolvent company.

A liquidator is an insolvency practitioner who is appointed to manage the liquidation of an insolvent company.

A Law of Property Act 1925 Receiver, or LPA Receiver, is a person (or company) who is appointed to take charge of a mortgaged property when the borrower has defaulted. An LPA Receiver will either sell the property or collect a rental income for the lender. LPA Receivers are usually surveyors and do not need to be licensed insolvency practitioners.

A form of Alternative Dispute Resolution (ADR) that is both voluntary and confidential. Generally conducted by a trained mediator, mediation is a process designed to reach a mutually acceptable resolution without the need for a formal court decision.

A Members Voluntary Liquidation, or MVL, is a voluntary procedure to liquidate a solvent company. The company must be able to show that it can pay all of its liabilities in full, plus statutory interest and the costs of the liquidation within 12 months.

Under s212 of the Insolvency Act 1986, misfeasance is defined broadly as the misapplication or retention of money or other property belonging to a company amongst other things. A liquidator or administrator can bring misfeasance claims against an officer or former officer of the company, any person who has acted as liquidator or administrative receiver or any person connected with or has previously taken part in or been concerned with, the promotion, formation or management of the company.

In essence, a force-field that acts to protect a company whilst it looks to appoint an administrator. The moratorium prevents creditors from taking any action (such as issuing proceedings) whilst in place.

A mortgage is legal agreement between, usually, a land owner and a money lender (such as a bank or building society), where money is lent by the lender to the borrower in return for some security in the property. The security usually takes form of a charge against the property and the term “mortgage” can be used to refer to the security that is given to the money lender. For a mortgage to be legally enforceable, it must be a definite period, and the mortgagor must have the right of redemption on payment of the debt whether it is on or before the end of that period.

The lender in a mortgage (generally a bank, building society etc). Remember lender = mortgagee

The borrower in a mortgage. Remember borrower = mortgagor

A nominee is a person or entity named or appointed by another (the nominator) to act on its behalf in a limited capacity or in a specific matter. In the case of an IVA/CVA, a licensed insolvency practitioner will be nominated in a proposal to act as a supervisor of the arrangement.

An office holder is a person appointed to a position by a company or organisation without a contract or regular wages. Office holders can include liquidators, provisional liquidators, administrators, administrative receivers, supervisors of a voluntary arrangements or trustees in bankruptcy.

The Official Receiver is an officer of the Insolvency Service. He deals with the first stage of bankruptcies and companies wound up by a court. His responsibilities include collecting and protecting assets for the benefit of creditors, finding out the reasons for the insolvency and acting as trustee or liquidator where no insolvency practitioner has been appointed.

The term onerous property, in the context of a liquidation or bankruptcy situation, applies to unprofitable contracts and property that is either unsaleable (or not easily saleable) or that might give rise to a continuing liability. Such property can be disclaimed by a liquidator or a trustee in bankruptcy.

An order to attend court for questioning, is not strictly speaking, a method of enforcement of a judgment. However, it can be used to gain knowledge about a debtor’s assets and employment so that a method of enforcement can be used. The court will summon the debtor to appear at court and answer selected questions.

A Partnership Voluntary Arrangement (PVA) is similar to a CVA but applied to partnerships rather than a company.

A plan entered into with a debtor that allows for the repayment of a debt over a prescribed period of time. Often used in situations where a debtor is struggling to pay his debts and the creditor is prepared to allow the debtor some time to repay what he owes without the need for legal action.

A petition is a formal written application to the court for relief or remedy. In the context of insolvency, creditors can often petition for an individual’s bankruptcy or seek to wind up a company.

The pre-action protocol is contained with the Civil Procedure Rules and sets out what creditors should deal with before initiating court proceedings. At present, there is not a specific guide for debt claims, but creditors are expected to comply with the general protocol and the spirit of it.

A preference is a term used to describe a payment or other transaction made by an insolvent company or individual to a specific creditor which places that creditor in a better position than they would have been otherwise. A liquidator, administrator or trustee in bankruptcy may wish to initiate proceedings against any director it suspects of making a “preference”. For a preference to be actionable it has to have been made within a period of either two years (where the creditor is a connected person) or six months (in other cases) of the insolvency.

A preferential creditor is a creditor who ranks above unsecured creditors in an insolvency. As an example, employees are classed as preferential creditors in respect of their wages.

A proof of debt is a document submitted by a creditor in an insolvency to give details of his claim.

A provisional liquidator is a qualified insolvency practitioner appointed after a winding up petition against a company has been presented. The principle purpose of their role is to ensure the preservation of the company’s assets. A provisional liquidator’s powers are directed by the court and are usually more limited than the powers of a liquidator.

The Pubs Independent Conciliation and Arbitration Service (PICA-Service) offers an accessible, independent, low cost dispute resolution service, to the licensed industry. Capped fees enable tenants/lessees and Pub Companies/Breweries to resolve disputes in a fair and timely manner. The Pubs Independent Conciliation and Arbitration Service or PICA-Service is a wholly owned subsidiary of Pubs Independent Rent Review Scheme which provides a low cost rent review resolution service to tenants/lessees and Pub Companies/Breweries. PIRRS and PICA-Service are provided by five of the industry’s leading associations: The Association of Licensed Multiple Retailers (ALMR) The British Beer and Pub Association (BBPA) The British Institute of Innkeeping (BII) The Federation of Licensed Victuallers Association (FLVA) and; The Guild of Master Victuallers (GMV).

In an insolvency setting, a recognised professional body (RPB) is an organisation that is recognised to authorise insolvency practitioners under the Insolvency Act 1986.

In law, this is a remedy based upon the principle of unjust enrichment. Where a person has been unjustly enriched (i.e. received something in a situation when he should not have done), the claimant may have a restitutionary claim against him. As an example, if an individual is over paid by his employer in error, the employer has a general right to reclaim that overpayment.

On long term projects, such as construction projects, there is usually a clause providing for a percentage of the contractual price to be retained until the project is complete (“the retention clause”). The retention clause can also apply pending checks to ensure the services provided comply with the requirements.

Retention of Title, ROT or Reservation of Title is a term within a sale or supply of goods contract which states that the title to such goods remains vested in the seller until certain obligations are satisfied by the buyer, which is usually payment of the purchase price.

A Scheme of Arrangement is an arrangement under Part 26 the Companies Act 2006 between a company and its members or creditors (or any classes of them) with the intent to effect reorganisations of the group structure. They are used for a variety of purposes such as to permit mergers, take overs and debt rescheduling. Permission of the court is required before a meeting of the creditors and members can take place. The court also decides whether the members or creditors are to be divided into classes for the purpose of voting. At the meeting, approval of at least 75% of each class of the creditors or members voting is required for the arrangement to be approved. Upon approval the court will review the fairness of the scheme and decide whether or not it should be sanctioned. If sanctioned by the court, the scheme is binding on all members and creditors of the company.

A secured creditor is a creditor whose interest in some or all of the debtor’s assets is secured against the debtor’s property. In the event of default, the creditor may have entitlement to take possession of those assets. If a debtor goes insolvent, the secured creditor will get priority over unsecured creditors when proceeds of the sale of the asset are distributed.

Security refers to an asset belonging to a debtor in which a creditor has an interest as a way of guaranteeing repayment of a debt (such as a charge over a property). In the event of the debtor’s default, the creditor may have entitlement to take possession of the secured asset.

If a judgment has been made against a debtor and he disputes this, he can make an application to court to set aside the judgment. There are various grounds that the debtor must satisfy in order to get the judgment set aside and the creditor is entitled to resist the application if he thinks it is wise to. A successful set aside application will ‘turn the clock back’ on proceedings and put the case back to where it was before judgment was obtained.

Under Companies Act 2006 (Section 251 (1)) a shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. This means an individual who is not a director of a company but effectively acts as one. The legislation also stipulates that a person is not to be deemed a shadow director merely by the fact that the directors act on advice given by him or her in their professional capacity.

A person or other entity that owns shares in a company. Shareholders have a range of powers including the right to remove the board of directors, change the company constitution or wind up the company amongst others.

A free service offered by the civil courts (in small claims matter) to try and facilitate a settlement without the need for a formal hearing. The Small Claims Mediation Service, if accepted by both parties, will offer a telephone mediation service generally lasting about an hour where the parties are expected to narrow the issues and agree a settlement, which is binding.

A Special Manager is an individual (who does not necessarily need to be an insolvency practitioner) that is appointed by the Court to aid in a bankruptcy or compulsory liquidation. Their role is to assist the Official Receiver, liquidator, Trustee in Bankruptcy in managing the business of the insolvent.

A statutory demand Is a formal demand for payment of an undisputed debt. The demand requires payment of the debt (which must exceed the sum of £750 in respect of companies, £5,000 in respect of individuals) within 21 days, failing which a bankruptcy petition or winding-up petition maybe presented.

A supervisor is an Insolvency Practitioner who is appointed by creditors. The role of the supervisor is to supervise the carrying out of plans such as company voluntary arrangements (CVA), or individual voluntary arrangements (IVA).

A method of enforcement of a judgment. A creditor is entitled to seek payment of a judgment debt from a third party, if that third party owes the debtor monies. Generally this means applying to court for an order that a bank release monies in accounts held for the debtor to the value of the debt.

A transaction at an undervalue can occur where an individual or company gives away or sells an asset for significantly less than its worth, prior to liquidation or bankruptcy. For a transaction at an undervalue to be actionable it has to have been made within a period of two years (in respect of company insolvency) or five years (in the case of bankruptcy) of the insolvency.

Trustee in its broadest sense, can refer to any person who holds a position of trust or responsibility, property or authority for the benefit of another. It is also used for a various insolvency appointments, including that of the Insolvency Practitioner who is appointed in a bankruptcy as a Trustee in Bankruptcy.

An unsecured creditor is a creditor who does not have the benefit of any security over the debtor’s assets. Unsecured Creditors are paid on a pro-rata basis once claims of all secured creditors have been satisfied.

VAT bad debt relief is the process whereby the VAT charged on an unpaid debt can be reclaimed from HM Revenue & Customs (HMRC).  The debt must be more than six months old but less than four years and six months old.

There are two types of voluntary arrangements: Individual Voluntary Arrangements (IVA) and Company Voluntary Arrangements (CVA). An IVA is a procedure allowing an individual with debt problems to reach a voluntary agreement with creditors to repay all or part of its debts over an agreed period of time. An IVA can only be administered by an insolvency practitioner and offers a formal alternative for individuals wishing to avoid bankruptcy. An IVA usually (but not always) comprises only the claims of unsecured creditors, leaving the rights of secured creditors largely unchanged. A CVA is a procedure allowing a company that is insolvent or with debt problems to reach a voluntary agreement with its creditors to repay all or part of its debts over an agreed period of time. Only an insolvency practitioner can supervise a CVA. An insolvency practitioner will draft a proposal to the creditors of the company, who in turn can vote on whether or not to accept the proposal.

There are two types of voluntary liquidations: Creditors’ Voluntary Liquidation and Members’ Voluntary Liquidation. Creditors’ Voluntary Liquidation (CVL) – where the shareholders of an insolvent company decide to put the company into liquidation. If there are not enough assets in the company to pay all the creditors, the company is considered insolvent. A CVL is under the effective control of the creditors, who can choose the liquidator. The liquidator is an insolvency practitioner. Members’ Voluntary Liquidation – where the shareholders of a solvent company decide to put it into liquidation. A statutory declaration must be given which provides that there are enough assets in the Company to pay all the debts of the company. The liquidator is an insolvency practitioner.

Winding-up is the process of dissolving a company. This is done by collecting all assets of the company, satisfying the creditors’ claims and other liabilities, and then distributing any remaining assets to the shareholders. See also Liquidation.

A winding-up order is an order made by the court for a company to be placed in compulsory liquidation. This is usually made following a formal winding-up petition issued by a creditor.

A winding-up petition is a legal document presented to the court seeking an order that a company be put into compulsory liquidation.

Workouts are an informal arrangements negotiated outside of court. They are made between a debtor and creditor as a way to take care of a debt (i.e. by re-negotiating a repayment plan or through loan forgiveness).

Wrongful trading refers to the acts of companies, who continue their normal business duties whilst technically insolvent (i.e. they are unable to pay their debts as they fall due). To succeed with an action for wrongful trading, it does not have to be shown that the director intended to defraud his creditors; rather that he showed poor judgement in continuing to trade whilst insolvent. If, once the company has entered administration or liquidation, it can be proved that a director has wrongfully traded, the court can order that the director make a contribution to the company’s assets as it thinks proper.