Glossary

In our glossary below we give the definition of some terms that are frequently used by an insolvency practitioner who provides an insolvency service.

Public Limited Company

A public limited company (PLC) is a company that makes available its shares to members of the public and has limited liability. Its shares are traded on the stock exchange.

Limited Company

A limited company has people or indeed organisations that own the company’s shares. Directors are frequently shareholders but do not have to be, although they are responsible for the running of the company. Limited companies have limited liability either by shares (the norm) or by guarantee. A shareholder’s responsibility for the financial liabilities of the company is limited to the value of the shares they own but have not paid anything for. The shares are not traded on the stock exchange.

Limited Liability Partnership (LLP)

A business that permits limited partners to have limited personal liability but still be involved in the internal organisation as a traditional partner.

Liquidation

The directors control the day to day running of a solvent business but should it become insolvent they can pass its control to a liquidator to deal with the liquidation of the company. The directors involvement in the business would then cease.

Voluntary Liquidation

A voluntary liquidation of a limited company is approved by the shareholders of a company and is either a members’ or creditors’ voluntary liquidation.

Members’ Voluntary Liquidation (MVL)

If the company is solvent, the shareholders can select a members’ voluntary liquidation and pay off any liabilities such as money owed to the bank, creditors, HMRC and shareholders. An example of when this could take place is when the owner of the business retires and decides to shut it down.

Creditors’ Voluntary Liquidation (CVL)

A director is permitted to propose a creditors’ voluntary liquidation if the company is insolvent and, if enough shareholders agree to the winding-up, the company will stop trading. An authorized insolvency practitioner is appointed as liquidator to deal with liquidating the company.

Company Voluntary Arrangement (CVA)

This is an alternative to an insolvent company going into liquidation. If the company has the approval of at least 75% of the creditors who are owed money and all the directors agree then an agreement can be made to repay the creditors over a fixed period and the now solvent company will be permitted to continue trading. A Company Voluntary Arrangement can only be obtained through an insolvency practitioner.

We hope you found our glossary of use and if you would like to find out more simply get in touch for a friendly, no obligation chat.