CIRA key terms

The financial condition in which a debtor cannot pay debts as they fall due or has liabilities exceeding the fair value of assets. It is a factual state, distinct from any formal court or regulatory proceeding.

A formal legal process, initiated by a debtor or creditor, in which a court supervises the orderly realisation and distribution of a debtor's assets or the restructuring of its obligations under insolvency legislation.

A test comparing total liabilities with the fair value of total assets. A debtor is balance sheet insolvent when liabilities exceed the realisable value of assets, even if current payments are being met.

A test of whether a debtor can meet obligations as they become due. A debtor may be cash flow insolvent despite holding substantial assets that cannot be quickly converted into cash.

A statutory freeze that takes effect on the filing of an insolvency proceeding, barring creditors from suing, enforcing judgments, or seizing assets without court permission. It preserves the estate while claims are sorted out.

A person or firm appointed to administer an insolvent estate, including taking control of assets, investigating affairs, adjudicating claims, and distributing proceeds to creditors in the statutory priority order.

An officer appointed, often by a secured creditor or court, to take possession of charged assets and manage or sell them for the benefit of the appointing creditor, rather than for all creditors generally.

A court-supervised rescue procedure placing a company under an administrator who manages its affairs with the primary objective of rescuing the business as a going concern, or achieving a better result for creditors than liquidation.

The process of winding up a company or estate by selling assets, collecting receivables, and distributing net proceeds to creditors in statutory order, after which the entity is dissolved.

A category of unsecured claim granted statutory priority over ordinary unsecured debts, typically covering employee wages, accrued holiday pay, and certain taxes. It is paid before ordinary unsecured creditors but after secured claims.

A creditor holding a mortgage, charge, lien, or other security interest over specific assets, entitling it to realise those assets and be paid from proceeds ahead of unsecured creditors, subject to limited statutory exceptions.

A formal written statement filed by a creditor in an insolvency proceeding, setting out the amount and basis of the debt owed. It is assessed and admitted or rejected by the trustee or administrator.

A claim whose existence or amount depends on a future uncertain event, such as a guarantee or pending litigation. Insolvency law typically allows such claims to be valued and admitted, often at a discount.

A debtor's right to net mutual obligations with a counterparty, reducing what is owed by the amount owed to it. Many insolvency regimes restrict or protect set-off to prevent unfair advantage over other creditors.

A payment or transfer made to a creditor shortly before insolvency that improves that creditor's position compared with others. Such transactions may be reversed by a trustee to restore equal treatment among creditors.

A transaction, such as an undervalue transfer or preference, that a trustee or administrator can challenge in court and have unwound so that assets or value are returned to the insolvent estate.

A transfer of property made with intent to hinder, delay, or defraud creditors. Courts can set such transfers aside, allowing the property or its value to be recovered for distribution among creditors.

The statutory ranking that determines the order in which creditors are paid from an insolvent estate, generally running from secured and preferential claims through unsecured claims to subordinated debt and equity.

A contractual or legal arrangement placing one creditor's claim behind another's in payment priority, so the subordinated creditor receives distributions only after senior claims are satisfied in full.

A contract among lenders setting out their relative rights, including payment priority, enforcement standstills, sharing of recoveries, and voting arrangements, which shapes outcomes in a later restructuring or insolvency.

A negotiated or court-supervised reorganisation of a distressed company's debts and operations, aimed at restoring viability by extending maturities, reducing principal, converting debt to equity, or renegotiating contracts.

A court-sanctioned arrangement that binds dissenting creditor classes to modified debt terms, typically requiring class-based voting and judicial confirmation that the plan is fair and feasible.

The power of a court to confirm a restructuring plan over the objection of a dissenting creditor class, provided statutory safeguards such as fair treatment and no unfair discrimination are satisfied.

An informal, out-of-court negotiation between a distressed borrower and its lenders to reschedule or reduce debt, avoiding formal proceedings and preserving value through lower cost and confidentiality.

A temporary arrangement in which creditors agree not to enforce remedies or demand repayment for a set period, giving the borrower time to negotiate a restructuring or complete a sale.

A legally imposed or agreed pause on creditor enforcement and debt service for a defined period, protecting a debtor in administration or restructuring while a rescue plan is prepared and voted on.

A programme of operational and financial measures, such as cost reduction, asset disposals, and management change, that restores a distressed business to profitability and sustainable cash generation.

The availability of cash and readily convertible assets to meet obligations as they fall due. Liquidity shortfalls, rather than negative net worth, most often trigger insolvency and restructuring action.

The assumption that an entity will continue operating for the foreseeable future without liquidation. When that assumption fails, assets are valued on a break-up basis and financial statements must disclose the uncertainty.

The process of estimating the worth of a business, asset, or claim using income, market, or cost approaches, with the standard applied depending on purpose, such as fair value, market value, or liquidation value.

The rate used to convert future cash flows into a present value, reflecting the time value of money plus risk. Distressed companies warrant higher rates, reducing valuations and recoveries.

A creditor-by-creditor estimate of how much each claim class would receive in a restructuring or liquidation scenario, used to test plan fairness and inform negotiating positions and votes.

The ordered allocation of available cash or proceeds among creditors according to their legal priority, often modelled in restructuring negotiations to show distributions to each class under competing scenarios.

A projection of receipts and payments over a defined horizon, often weekly in distress situations, used to test liquidity headroom, identify funding gaps, and support a restructuring or going-concern conclusion.

New funding advanced to a company in insolvency proceedings, usually granted priority over existing debts and secured by estate assets, to keep operations running during the case.

A statutory or court-granted ranking placing specified claims, such as post-filing financing or professional costs, ahead of existing secured and unsecured creditors to encourage rescue funding.

A creditor without security over specific assets, whose claim ranks behind secured and preferential debts and who typically receives only a partial distribution in liquidation.

A person or entity owed money or performance by a debtor. Creditors may be secured, preferential, or unsecured, and their rights differ significantly in restructuring and insolvency proceedings.