Beer & Young Turnaround Finance Glossary

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Administration	A procedure used to preserve the company’s business, allow a re-organisation or more advantageous realisation of assets when a liquidation whilst providing a moratorium against creditors
Administrative Receiver	A Receiver of manager of the whole or substantially the whole of the company’s property appointed by the holder of a Floating Charge. Has the power to sell the assets secured by the charge or to carry on the company’s business. Main duty is to be the appointing debenture holder. Must be a Licensed Insolvency Practitioner
Administrator	Appointed by the Court to manage the business and property of the company during administration. Must be a Licensed Insolvency Practitioner
Advisor	Professional person or experienced operational manager
Angels	Shortened term for Business Angels – normally individuals looking to invest their own capital
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Bond	Insurance cover to protect the uncharged assts of an insolvent estate which is required when a Licensed Insolvency Practitioner takes an appointment
Break-up	The selling of assets piecemeal following the cessation of trade
Budgets	Plans for income and expenditure
Business Advisor	Experienced operational manager
Business Angel	Normally individuals looking to invest their own capital. Also known as White Knights or simply Private Investors
Business Finance	As the term suggests, this means finance for businesses. The most common forms are bank loans and overdrafts, factoring and invoice discounting facilities, leasing, investment
Business Investment	Source of capital or loan into a business
Business Plans	Detailed operational plans for activity and finance
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Capital injection	An injection of capital, in most cases new money coming into the business
Commencement of winding-up	In the case of a voluntary liquidation, the date of the resolution to wind-up. In the case of a compulsory liquidation, on the presentation of the winding-up petition
Company Doctor	Advisor for the introduction of turnaround strategies
Company Voluntary Arrangement	An agreement entered into between a company and its creditors following proposals made by the directors to the company and creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs. If approved by a requisite majority these are then implemented by an Insolvency Practitioner. They bind everyone who was entitled to vote at the creditors meeting. A CVA does not create a moratorium or prevent a secured creditor from enforcing its security
Compulsory Liquidation (Winding-Up)	The winding-up of a company by the Court. Initiated by a Petition to the Court presented by the company itself, the directors or the creditors. The grounds include Special Resolution of the company; that the company is unable to pay its debts; the number of members is reduced below two, or that in the Court’s opinion it would be just and equitable to wind the company up
Consultant	Freelance Advisor for specific business situations
Court Appointed Receiver	A person appointed by the Court to take charge of assets usually which are subject of a legal dispute. This process is not limited to insolvency situations
Creditors Committee	A Committee formed by the creditors to assist the Office Holder in performing these duties. Consists of a minimum of three and a maximum of five members
Creditors Voluntary Liquidation	The winding-up of a company by Special Resolution of the members when it is insolvent but where the winding-up is under the effective control of the creditors who can choose a Liquidator. A meeting of creditors must be held within 14 days of such a resolution and the creditors must be given seven days notice of the meeting. Notices must also be posted in the Gazette and two local newspapers
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Debenture	Generally, a document which either acknowledges or creates a debt. Commonly used to describe a document denoting a Fixed and Floating Charge over the assets and undertakings of a company
Declaration of Solvency	A statutory declaration of solvency is made (where it is proposed to wind the company up voluntarily) by the directors stating that they are of the opinion that the company will be able to pay its debts in full within 12 months from the commencement of winding up. If no such declaration is made then the winding-up is a creditors voluntary winding-up
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Enterprise Act 2002	New legislation brought into effect to update the 1986 statute which includes streamlined procedures for a number of insolvency types, abolition of Crown preference, Prescribed Part, etc
Equity	A share that does not bear interest. The value of shares issued by a company. A private investor, when investing capital into a business will require equity – i.e. Shares in the business
Executive	Operational
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Factoring – Factors	Factoring is a common finance tool or arrangement with a finance company or bank. It allows the bank to advance monies to a business against its debtors (customers) thus helping cash flow. The bank or finance company will then manage your debtors on your behalf
Finance	In simple terms, finance means money or an arrangement of money. In the business community the most common forms are bank loans and overdrafts, factoring and invoice discounting facilities, leasing, investment
Fixed Charge	A form of security over specific assets
Floating Charge	A charge over the assets of a company which floats over the assets until crystallised by a pre-determined event. The assets may be dealt with by the company until the crystallising event occurs when the secured creditor can realise the assets to settle its debt, usually by appointing an Administrative Receiver
Forecast	Budget and business plan
Fraudulent Trading	If in the course of winding-up it appears that any business of the company had been carried out with an intent to defraud creditors, any responsible party may be required to make such contributions to the assets of the company as the Court thinks fit
Funder/Funding	These terms mean a provider of or providing finance (funds)
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Going Concern	The sale of the ongoing business of the company, often the preferred route of a Licensed Insolvency Practitioner since it usually means that the business continues, bobs are saved and a higher price is obtained
Guarantee	A legal commitment by a third party to repay a debt if the original debtor fails to do so. Directors may give guarantees to banks in return for the bank providing finance to their companies. A guarantee must be clear on its terms
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High net worth individuals	As the term suggests, these are wealthy individuals. In the business community many of these people become private investors
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Inability to pay debts	A company is deemed unable to pay its debts if (a) a creditor to whom the company owes over £750 has served a written statutory demand and the company has not paid the sum within three weeks; (b) execution or other process issued on a judgement or Order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; (c) it is proved to the Court’s satisfaction that the company is unable to pay its debts when they fall due; (d) it is proved to the Court’s satisfaction that the value of the company’s assets is less than the amount of its liabilities
Injection of capital	Investment or loan from external source
Insolvency Act 1986	Primary legislation governing insolvency in the UK supplemented by the Insolvency Rules 1986
Insolvency Practitioner	A person authorised to undertake insolvency appointments as a Liquidator, Administrator, Administrative Receiver or Nominee or must Supervisor under a Voluntary Arrangement. Must satisfy the requirements set out in the Insolvency Act
Interim Manager	Temporary cover to manage discreet initiatives and install wider knowledge or continuance of managerial activities during executive search
Investment	A broad term, in our industry it generally means an injection of capital into a business. This could be from a number of sources for example an institution, bank, venture capital house or private investor
Invoice Discounting	This is a common finance tool or arrangement with a finance company or bank. It allows the bank to advance monies to a business against its debtors (customers) thus helping cash flow. The company will continue to manage their own debtors
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Leasing	A form of finance, normally a 3-5 year contract, based on or secured against an item or asset
Lien	The right of one person to retain possession of goods owned by another until the possessor’s claims against the owner have been satisfied
Liquidation	A process whereby all of a company’s assets are collected and distributed. The effect of liquidation is that the company ceases to exist as a commercial entity. Once liquidation is over the company is dissolved
Liquidator	A person appointed by the Court or by the members and creditors of a company to regularise the company’s affairs under liquidation
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Majority Stake	An investor taking or holding shares in a business, which in percentage terms is more than 50%
Management Accounts	Details of financial performance
Management Assistance	External help and advice
Manager	Operational decision maker and forward planner
Members Voluntary Liquidation	Utilised if the company is solvent and a declaration of solvency has been made. If during the liquidation it becomes clear that the company will not in fact be able to pay its liabilities in full then the winding-up converts to creditors voluntary winding-up
Minority Stake	An investor taking or holding shares in a business, which in percentage terms is less than 50%
Moratorium	Imposed on a company as a Notice of Intention to Appoint and Administrator is filed in Court. IT means that winding-up petition cannot be issued and that no creditors can take any steps to enforce security over the company’s property, commence or continue any legal proceedings or levy distress against the company’s property
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Net Property	Net Property is defined as Floating Charge realisations less the costs of Floating Charge realisations and the preferential creditors
Non Executive	Non operational person attached to the company through board or consultancy appointment
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Official Receiver	An Officer of the Court, Civil Servant or Member of DTI. Deals with bankruptcies and compulsory liquidations
Onerous Property	In the context of a liquidation this applies to unprofitable contracts and to property that is unsaleable or not easily saleable or that may give rise to a continuing liability. Onerous property can be disclaimed by the Liquidator
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Preference	Where an insolvent company has within a certain time entered into a transaction preferring one creditor over another, the transaction can be set aside by the Court
Preferential Creditor	A creditor whose debt or part of whose debt will be met in preference to other creditors. Until recently this included the Inland Revenue, HM Customs & Excise and certain employee claims. The Crown departments have had their preferential status withdrawn although certain employee claims remain
Prescribed Part	The Receiver, Liquidator or Administrator of an insolvency procedure that commenced on or after 15 September 2003 is now required, where there is a floating charge which was created after 15 September 2003, to set aside a Prescribed Part of the company’s net property for distribution to the unsecured creditors
Private Investment	An injection of capital into a business from a private investor
Private Investor	Normally an individual, looking to invest his or her own capita Also known as a Business Angel or White Knight
Proof of Debt	A creditor who submits a claim to the Liquidator in respect of the amount owed to him by the company is described as ‘proving for his debt’ and the document by which he seeks to establish the claim is his ‘Proof’. In compulsory liquidations creditors must submit a proof but in a voluntary liquidation they need only do so if the Liquidator so requires or in order to be entitled to vote at any Creditors Meetings
Provisional Liquidator	The name given to a Licensed Insolvency Practitioner appointed by the Court to safeguard a company’s assets before a Winding-Up Order has been made but after the presentation of a Petition
Proxy	A document under which a creditor authorises another person to represent them at a meeting of creditors. A corporation may only be represented by proxy
Proxy holder	A person who attends a meeting on behalf of someone else and is authorised under a proxy
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Qualifying Floating Chargeholder (QFCH)	A Qualifying Floating Charge holder is a holder of a charge which states that the QFCH has the power to appoint an Administrator using the out-of-court route; provides that the QFCH may appoint an Administrator or an Administrative Receiver and the charge relates to the whole or substantially the whole of the company’s property
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Recovery Finance	The general term for finance, required by a company who is suffering from trading difficulties. Also known as rescue finance or turnaround finance
Reorganise	Change management
Rescue Finance	A general term for finance, which is required by a company who is suffering from trading difficulties. Also known as recovery finance or rescue finance
Restructuring	Plans for reorganisation for future development. Growth and downsizing
Retention of Title Clauses	These are clauses in a contract which state that the Vendor retains title to the goods supplied until the Purchaser pays for them. A valid ROT clause is effective in ensuring that the Vendor is entitled to the goods (for the proceeds of their further sale) if the company becomes insolvent and does not create a charge (unless registered)
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Secured Creditors	Those creditors having a charge over the assets of the company. Fixed Charge holders are generally paid first out of the assets of the company (after the payment of costs and expenses) and prior to the preferential creditors. Floating Charges rank after preferred creditors but, to the extent of their security, before ordinary creditors
Shareholder	An investor who has exchanged equity in the business for the investment. Various amounts held determine actual control of the business
Shares	Equity of a business
Sleeping partner	Investor with no operational involvement
SME	Small to medium sized enterprises
Statement of Affairs	IN an administration, the Administrator has a duty to require a Statement of Affairs from present or former officers or employees capable of giving information. The Statement must usually be prepared within 21 days and must set out details of the company’s assets, debts and liabilities. It is the basis for the application for an Administration. It is also used in other insolvency procedures
Statutory Demand	A demand for payment in the for prescribed by the Statute. If the debtor does not comply with the demand within the required time (21 days), winding-up proceedings may be brought
Supervisor	A Licensed Insolvency Practitioner appointed by creditors to supervise the implementation of a Voluntary Arrangement
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Transaction at an Undervalue	A Liquidator or Administrator can apply to the Court to have set aside transactions where the company has within a certain time period made a gift to any person and receivers either no consideration or consideration worth considerably less than the consideration provided by the company. However, the transaction can not be set aside if it was entered into in good faith for the purpose of carrying on the company’s business and at a time when there were reasonable grounds for believing that the transaction would benefit the company. Under Section 423 of the Insolvency Act 1986 anyone can apply where the intention of the transaction was to defraud the creditors
Turnaround Finance	A general term for finance, which is required by a company who is suffering from trading difficulties. Also known as recovery finance or rescue finance
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Unsecured Creditors	There are ordinary creditors whose debt is not secured by a charge. They rank after all the preferred creditors and secured creditors and rank equally amongst themselves
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Venture Capital	Investment made by Venture Capital companies. These companies vary; some are privately owned, others part of major organisations. They typically consider investments between £1 million and £20 million
Venture Capital Trusts (VCT)	Bodies that make investments normally where there are tax advantages. Seen as not as strict as VC’s but still invest accordingly to their own criteria.
Voluntary Liquidation	Commenced by a Resolution of the company that it be wound-up. The winding-up commences from the date of the passing of the Resolution. There are two types of voluntary liquidation: a Members’ Voluntary Liquidation and a Creditors Voluntary Liquidation
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White Knights	Normally individuals looking to invest their own capital. Also known as Business Angels or simply Private Investors
Winding-Up Petition	A Petition presented to the Court for an Order that a company be placed into compulsory liquidation
Winding-Up Order	An order made by the Court for a company to be placed into compulsory liquidation
Wrongful Trading	Where a company is being wound-up, the directors of that company may be made liable, by the Court, to contribute to the assets of the company if they are found guilty of wrongful trading. A director will be guilty of wrongful trading where the company goes into insolvent liquidation and he knew, or ought to have concluded, that there was no reasonable prospect that the company would avoid going into insolvent liquidation. It is a defence for a director to show that he took every step with a view to minimising the potential loss to the company’s creditors as he ought to have taken.