Glossary of UK Insolvency Terms

Have you seen phrases such as “winding-up petition” in the Gazette or received a 21-day statutory demand letter? When jargon appears at the worst possible moment, clarity is crucial. This glossary offers plain-English, UK-specific definitions for key insolvency terms drawn from UK legislation and GOV.UK guidance, checked as at 5 March 2026, and written in the style of a licensed insolvency practitioner.

This material is for information only and does not constitute legal advice. Need the essentials first? Head straight to the quick primer below.

Why directors need an insolvency glossary

Misreading a single line of insolvency jargon can turn a routine cash-flow hiccup into a court date, a frozen bank account or even a personal claim. Knowing exactly what each term means lets you spot deadlines, understand when creditor rights overtake yours and decide whether to call an insolvency practitioner now or keep trading.

Insolvency jargon is the web of legal words found in UK statutes, court forms and bank correspondence,  phrases such as “statutory demand”, “wrongful trading” or “floating charge”. They may look interchangeable, yet each carries its own trigger date or liability test. Miss the 21-day response window on a statutory demand, for example, and a creditor can petition to wind the company up for as little as £750. Continue to trade once insolvency is unavoidable and you risk wrongful trading orders that could require directors to contribute personally to creditor losses.

Typical documents where these terms appear:

• Statutory demand
• Gazette notice of a winding-up petition
• Bank letter demanding immediate repayment or freezing facilities

First, grasp the four cornerstone procedures below.

The four cornerstone procedures at a glance

When a company faces serious financial trouble, it usually follows one of four formal routes. Understanding their core purpose, who controls the process and how directors are affected helps you assess urgency and decide on next steps quickly.

Procedure	Purpose, Control, Immediate Director Impact
Insolvency (tests)	Confirms the company cannot pay debts as they fall due or liabilities exceed assets (Insolvency Act 1986 s.123).Day-to-day control stays with directors until a formal process starts.Directors must avoid new credit they believe cannot be repaid or risk wrongful trading claims.
LiquidationCVL (insolvent) MVL (solvent)	CVL closes an insolvent company and sells assets for creditors, while MVL distributes surplus to shareholders.A licensed liquidator takes full control from appointment.Directors’ powers cease and conduct is reported to the Insolvency Service.
Administration	Formal procedure under Schedule B1 Insolvency Act 1986 designed to rescue the company or achieve a better outcome for creditors than liquidation.An administrator runs the company after appointment by court order or by permitted out-of-court filing.Directors lose control but must assist the administrator.
Company Voluntary Arrangement (CVA)	Contract with creditors to repay part or all debts over time while trading continues.Directors stay in control day to day, supervised by an IP (nominee then supervisor).Approval requires 75% in value of voting creditors.

For administration, and for CVAs with a moratorium where applicable, most creditor enforcement pauses, giving the business vital breathing space.

Almost every other term in this glossary links back to one of these four procedures.

Who does what & who gets paid first

When formal insolvency begins, two questions shape strategy: who manages the process, and where does each creditor rank in the payout queue?

Office-holders

Office-holder	One-line duty
Administrator	Takes control of the company in administration to rescue it or maximise creditor returns.
Liquidator	Realises assets in liquidation and distributes proceeds under statutory order.
Official Receiver	Court officer who initially handles compulsory liquidations and bankruptcies.
Trustee in Bankruptcy	Controls and realises a bankrupt person’s estate for creditors.
Nominee (CVA)	Reviews a proposed CVA and reports to creditors before the vote.
Supervisor (CVA/IVA)	Oversees the arrangement once approved and distributes payments.

Order of payment (simplified)

#	Paid in this order	Typical contents
1	Costs & expenses	Office-holder fees and legal costs
2	Fixed-charge creditors	Lenders secured on specific assets
3	Preferential creditors	Certain employee claims and certain HMRC debts
4	Prescribed part for unsecured creditors then remaining unsecured claims	Portion of floating-charge recoveries set aside for unsecured creditors under IA 1986 s.176A
5	Shareholders	Surplus after creditors paid

The prescribed part is capped at £800,000 for qualifying floating charges.

How to use the A–Z below

Find the definition you need quickly. The glossary is arranged alphabetically, so you can:

• jump straight to a letter via the on-page links
• press Ctrl + F (⌘ + F on Mac) and type the term.

Many entries include “see also” pointers to related terms.

All definitions reflect UK legislation such as the Insolvency Act 1986, Insolvency Rules 2016, and GOV.UK guidance.

Insolvency glossary A–Z

A

Administrator – Licensed insolvency practitioner appointed to manage a company in administration with the objective of rescue or improved creditor returns (Insolvency Act 1986 Schedule B1).

Administration – Formal insolvency procedure under Schedule B1 Insolvency Act 1986 that places the company under the control of an administrator and creates a moratorium preventing most creditor enforcement.

Administration Order – Court order placing a company into administration where the court route is used (Insolvency Act 1986 Sch B1).

Antecedent Transaction – Pre-insolvency transaction such as a preference or transaction at undervalue that can be challenged by an office-holder (IA 1986 ss.238–241).

B

Bankrupt – Individual subject to a bankruptcy order made by the court (IA 1986 s.267).

Bankruptcy Estate – All property belonging to a bankrupt individual that vests in the trustee for the benefit of creditors (IA 1986 s.283).

Bankruptcy Order – Court order formally declaring an individual bankrupt (IA 1986 s.267).

Bankruptcy Petition – Application to the court requesting a bankruptcy order (IA 1986 s.268).

C

Company Voluntary Arrangement (CVA) – Binding compromise between a company and creditors approved by 75% in value of creditors voting (IA 1986 Part I).

Compulsory Liquidation – Court-ordered winding up following a petition by a creditor, the company, or certain authorities (IA 1986 Part IV).

Cram Down – Court power under restructuring plan legislation allowing dissenting creditor classes to be bound if statutory fairness tests are met (Companies Act 2006 Part 26A).

Creditor – Any person or organisation owed money by the debtor.

D

Debtor – Individual or company that owes money to creditors.

Disqualification Order – Court order banning a person from acting as a company director for between 2 and 15 years (Company Directors Disqualification Act 1986).

Distribution (Dividend) – Payment made to creditors from realised insolvency assets (Insolvency Rules 2016 Parts 14–15).

E

Examination (Debtor Interview) – Interview conducted by the official receiver or trustee about the bankrupt’s financial affairs.

F

Fixed Charge – Security granted over specific assets such as property or equipment, giving the lender priority over proceeds from those assets.

Floating Charge – Security over circulating assets such as stock or receivables that may crystallise upon insolvency (IA 1986 s.251).

Fraudulent Trading – Carrying on business with intent to defraud creditors; both civil and criminal liability may arise (IA 1986 s.213).

G

Gazette Notice – Public insolvency notice published in The Gazette, the UK’s official public record.

I

Individual Voluntary Arrangement (IVA) – Agreement between an individual debtor and creditors approved by 75% of voting creditors (IA 1986 Part VIII).

Insolvency – Financial condition where debts cannot be paid as they fall due or liabilities exceed assets (IA 1986 s.123).

Insolvency Practitioner (IP) – Professional authorised to act as liquidator, administrator or trustee (IA 1986 Part XIII).

L

Liquidation (Winding Up) – Process of collecting and selling company assets and distributing proceeds to creditors (IA 1986 Parts IV–V).

Liquidator – Person responsible for conducting liquidation and distributing proceeds.

M

Members’ Voluntary Liquidation (MVL) – Solvent liquidation initiated by shareholders after directors swear a statutory declaration that debts will be paid in full within 12 months (IA 1986 s.89).

Misfeasance – Breach of duty or misapplication of company property by a director or officer (IA 1986 s.212).

Moratorium – Period during which most creditor enforcement actions are halted, for example during administration or under the standalone moratorium introduced by the Corporate Insolvency and Governance Act 2020.

N

Nominee (CVA) – Insolvency practitioner who assesses a CVA proposal and reports to creditors before the vote.

Notice of Intention to Appoint Administrator – Filing by directors or a qualifying floating-charge holder giving at least five business days’ notice before appointment (IA 1986 Sch B1 para 26).

O

Official Receiver – Officer of the Insolvency Service who initially administers compulsory liquidations and bankruptcies.

P

Preference – Transaction placing one creditor in a better position than others shortly before insolvency (IA 1986 s.239).

Pre-Pack Administration – Sale of the company’s business arranged before the administrator’s appointment and executed shortly afterwards.

Prescribed Part – Portion of floating-charge asset recoveries reserved for unsecured creditors (IA 1986 s.176A), capped at £800,000.

Proof of Debt – Creditor’s formal claim submitted to participate in distributions (Insolvency Rules 2016).

R

Receiver (Administrative Receiver) – Insolvency practitioner appointed by a floating-charge holder under certain pre-2003 security arrangements.

Restructuring Plan – Court-sanctioned compromise under Companies Act 2006 Part 26A allowing cross-class cram-down.

S

Scheme of Arrangement – Court-approved compromise between company and creditors or shareholders under Companies Act 2006 Part 26.

Secured Creditor – Creditor holding security over company assets.

Shadow Director – Person whose directions the company’s directors habitually follow (Companies Act 2006 s.251).

Statement of Affairs – Formal statement listing assets and liabilities submitted early in insolvency proceedings.

Statutory Demand – Formal demand for payment which, if unpaid after 21 days, may support bankruptcy or winding-up proceedings.

T

Transaction at Undervalue – Disposal of assets for significantly less than market value before insolvency (IA 1986 s.238).

Trustee in Bankruptcy – Person responsible for administering the bankrupt estate (IA 1986 s.305).

U

Unsecured Creditor – Creditor without security ranking behind secured and preferential creditors.

V

Validation Order – Court order allowing payments or asset disposals after a winding-up petition that would otherwise be void (IA 1986 s.127).

Voluntary Liquidation – Winding up initiated by shareholder resolution rather than court order.

W

Winding-Up Order – Court order placing a company into compulsory liquidation.

Winding-Up Petition – Application to the court requesting compulsory liquidation.

Wrongful Trading – Civil liability arising where directors continue trading when they knew or ought to have concluded insolvency was unavoidable (IA 1986 s.214).

FAQs

When to seek professional advice

If a term in this glossary reflects what is happening inside your company, particularly if you have received a statutory demand, winding-up petition, or bank enforcement notice, speak to a licensed insolvency practitioner immediately.

Only licensed insolvency practitioners can act as liquidator, administrator, trustee or CVA supervisor under the Insolvency Act 1986.

Typical red-flag moments include:

• receiving a winding-up petition
• struggling to pay PAYE, VAT or wages
• being asked to produce a Statement of Affairs
• doubts about continuing to trade while insolvent

This guidance is for information only and is not legal advice.

Early professional advice often preserves restructuring options and protects directors from unnecessary risk.