The term 'Act of Bankruptcy' refers to actions or behavior indicating that a person or entity might be judged as bankrupt. Such behavior often includes transferring property titles to others with the intent to delay or defraud creditors and admitting bankruptcy.
A bankruptcy petition is a document filed with the bankruptcy clerk's office to formally initiate a bankruptcy proceeding. It specifies the bankruptcy chapter under which the debtor seeks relief and contains comprehensive information about the debtor’s financial status, creditors, assets, liabilities, and recent asset transfers.
The purchase of assets or other goods for substantially less than the fair market value. A bargain purchase can be made when the vendor is in liquidation or is otherwise financially distressed.
The process of restructuring a company that is in trouble by producing new finance to save it from liquidation, at the cost of diluting the shareholding of existing investors.
A Company Voluntary Arrangement (CVA) is a legally binding agreement between a company and its creditors to restructure debt and avoid liquidation.
Distress termination is a type of plan termination that occurs when a company is in severe financial distress, such as bankruptcy, and cannot afford to continue its pension plan.
Distressed property refers to real estate that is under foreclosure or impending foreclosure due to insufficient income production. Such properties often require unique strategies for recovery, including potential workouts.
Financial distress refers to a situation in which the activity of a business is influenced by the possibility of impending insolvency. This state incurs various costs, ranging from those related to bankruptcy to costs arising from stakeholders' changes in behavior and managerial focus.
Gearing refers to the relationship between funds provided to a company by ordinary shareholders and long-term funds with a fixed interest charge such as debentures and preference shares. High gearing implies higher fixed charges on debt, impacting investment risk and returns.
Inability to pay one's debts when they fall due, which may lead to bankruptcy for individuals or liquidation for companies.
Liquidating value refers to the projected price for an asset of a company that is going out of business, such as a real estate holding or office equipment. This value is often distinguished from the going-concern value, which may be higher due to factors such as organization value or goodwill.
An open mortgage is a mortgage that has matured or is overdue, making the property susceptible to foreclosure at any time. It is a financial situation where the borrower has failed to make timely payments, removing any safeguards against lender actions to reclaim the property.
A dividend customarily paid on common shares that the board of directors fails to declare, usually due to financial difficulties at the company; also referred to as an omitted dividend. It differs in implications when associated with cumulative preferred stocks, where the passed dividends accrue until paid.
Preference occurs when an insolvent debtor favours a particular creditor, such as by paying one creditor in full, to the disadvantage of other creditors. If the debtor becomes bankrupt or goes into insolvent liquidation, the court can order restoration to ensure equitable treatment among all creditors.
Recontracting is the renegotiation of contracts between a company in financial distress and its creditors to establish more favorable terms.
A statutory demand is a formal request issued by a creditor to a debtor demanding the repayment of an outstanding debt. It serves as evidence of a debtor's inability to pay if unmet, and can support a compulsory liquidation petition under the Insolvency Act 1986.
Wrongful trading refers to the act of continuing to trade when a company has no reasonable prospect of avoiding insolvency. Directors can be held personally liable if they knew, or should have known, about the company's financial predicament.
