III IC-88 key terms

The financial condition in which a person or company 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 legal proceeding.

A formal legal status, typically declared by a court, that a person or entity is insolvent and subject to a statutory process for dealing with debts and distributing assets among creditors.

The process of winding up a company, ceasing its operations, realizing its assets, and distributing the proceeds to creditors and then to members according to their entitlements and priority rules.

An independent practitioner appointed to take control of an insolvent company, realize its assets, investigate its affairs, and distribute proceeds to creditors in accordance with statutory priorities.

The collective statutory procedure by which a company's existence is brought to an end, its affairs are wound up, and it is eventually dissolved from the register of companies.

The final stage in a company's life when it ceases to exist as a legal entity, typically occurring after winding up is complete and the registrar removes it from the register.

A statutory rescue procedure placing a company under the control of an administrator who attempts to keep the business going or achieve a better result for creditors than immediate liquidation.

A licensed insolvency practitioner appointed to manage an insolvent company's affairs during administration, with statutory objectives ranked in order of priority and wide powers over the business and assets.

A temporary legal freeze on creditor action, such as enforcement, winding-up petitions, or repossession, granted during procedures like administration to give the company breathing space to reorganize.

An arrangement where the sale of a company's business or assets is negotiated before an administrator is formally appointed, so the sale completes immediately on appointment rather than through open marketing.

A procedure in which a secured creditor appoints a receiver over charged assets to enforce its security, realize the assets, and recover the debt owed to that creditor.

A court-sanctioned compromise between a company and its creditors or members, allowing debts or rights to be restructured when approved by the requisite statutory majority of each affected class.

A court-approved arrangement that can bind dissenting classes of creditors or members, used to reorganize a company's liabilities where a traditional scheme would fail for lack of class consent.

The power of a court to confirm a restructuring or reorganization plan over the objection of a dissenting class of creditors, provided statutory fairness and safeguard conditions are satisfied.

A person or entity to whom money or performance is owed by a debtor. Creditors may be secured, preferential, or unsecured, and their ranking affects recovery in an insolvency.

A creditor holding a mortgage, charge, lien, or other security interest over specific assets, giving it priority over unsecured creditors in respect of the secured property.

A creditor without security over the debtor's assets, whose claim ranks behind secured and preferential claims and who typically receives only a dividend from remaining assets.

A creditor whose claim is given statutory priority over ordinary unsecured debts, commonly covering certain employee wages, taxes, or contributions to specified funds.

Security over specific, identifiable assets such as land or machinery, which the borrower cannot freely dispose of without the lender's consent and which ranks ahead of floating charges.

A security interest over a fluctuating pool of assets, such as stock or receivables, that the company may deal with in the ordinary course until the charge crystallizes on a defined event.

The event that converts a floating charge into a fixed charge over the assets then within its scope, typically triggered by liquidation, cessation of business, or a specified default.

A principle requiring creditors of the same class to share in distributions rateably in proportion to their admitted claims, rather than on a first-come, first-served basis.

The statutory or contractual ranking that determines the order in which claims are paid from realized assets, from secured and preferential claims down to ordinary unsecured and member interests.

An arrangement or rule under which one claim ranks behind another and is paid only after the higher-ranking claim is satisfied, often agreed contractually by a lender.

A formal written claim submitted by a creditor to an insolvency practitioner, setting out the amount owed and supporting evidence, which the practitioner admits or rejects for dividend purposes.

A distribution of realized funds paid to creditors in an insolvency, usually expressed as a percentage of admitted claims, and made in accordance with statutory priority rules.

A body elected by creditors to represent their interests, receive information from the insolvency practitioner, and be consulted on significant decisions during the proceedings.

The practitioner appointed to administer a bankrupt individual's estate, realize assets, adjudicate claims, investigate conduct, and make distributions to creditors.

The release of a bankrupt individual from most remaining provable debts at the end of the bankruptcy period, subject to statutory exceptions and any court restrictions.

A test of insolvency asking whether a company can pay its debts as they fall due, looking at available liquidity and expected receipts rather than the balance sheet alone.

A test of insolvency comparing the company's liabilities with the value of its assets, where liabilities exceed assets on a fair valuation the company is insolvent.

Liability imposed on directors who continue to trade when they knew or ought to have known insolvent liquidation was unavoidable, requiring them to account for losses caused.

Carrying on business with intent to defraud creditors or for any fraudulent purpose, a serious offence exposing those involved to criminal liability and personal civil contribution.

A court or regulator order barring a person from acting as a company director or manager for a specified period because of unfit conduct in relation to an insolvent company.

A transaction that unfairly improves one creditor's position shortly before insolvency, which the practitioner may challenge and reverse to restore assets to the general pool.

A disposal of assets for significantly less than their worth, or a gift, made within a defined period before insolvency and liable to be challenged and unwound by the practitioner.

An administrative process by which a company is removed from the register, often for failure to file documents, without a full winding-up procedure or distribution to creditors.

The treatment of an insolvency with assets, creditors, or proceedings in more than one country, often coordinated through recognition of foreign proceedings and assistance to foreign practitioners.

The formal acceptance by a court in one jurisdiction of a foreign insolvency proceeding or practitioner, enabling relief such as a stay on local actions or access to local assets.