A guide into the insolvency process

What is an insolvency administration order?

If the estate of someone who has died is insolvent (i.e. more money is owed than can be realised from the deceased’s assets), either the personal representative of the deceased or a creditor can apply to the court in England & Wales or Northern Ireland for an insolvency administration order. It is equivalent to a bankruptcy order.

A similar term – administration order – is more commonly used in corporate insolvency in the UK when the court appoints one or more administrators to manage the business, affairs and property of a company. The court making such an order is one of the mechanisms for a company going into administration. 

What is cross border insolvency?

Cross-border insolvency is a term used to describe a situation where the debtor has assets and/or liabilities in more than one jurisdiction.  A UK insolvent company or individual may have assets and/or liabilities abroad. Or a foreign insolvent company or individual may have assets and/or liabilities in the UK.

The key to dealing with cross-border insolvency is communication and cooperation between insolvency professionals on either side of the border in question.

At Mercer & Hole cross-border insolvency work is led by corporate restructuring partner Chris Laughton.  Chris is a past president of INSOL Europe, the European association of restructuring and insolvency professionals. We regularly work with TAG Alliances members, INSOL Europe members or other international cooperation partners.

What is an insolvency debt relief order?

Debt relief orders (DROs) were introduced under Chapter 4 of the Tribunals, Courts and Enforcement Act 2007. A DRO is a simplified, quicker and cheaper alternative to bankruptcy for individuals in England & Wales or Northern Ireland.  DROs are suitable for debtors who have few or no assets (less than £1000 and not homeowners) and little disposable income (less than £50 per month). It is possible to apply for a DRO without attending court and the fee is £90. The fee may be paid by instalments prior to applying for the order.

What is the difference between insolvency and bankruptcy?

Insolvency is a general term. It means being unable to pay your debts. A person or a company can be (and usually will be) insolvent before going into a formal insolvency process such as:

• administration,
• liquidation,
• an individual voluntary arrangement (IVA), or 
• bankruptcy.

Bankruptcy is a particular type of insolvency procedure applicable to insolvent individuals in England & Wales (or Northern Ireland). A creditor, someone who is owed money by the individual, can present a petition to the court for a bankruptcy order. Alternatively, an insolvent individual can apply for their own bankruptcy.

In some jurisdictions (e.g. the USA) the term bankruptcy is used more generally to mean the state or subject of being in a formal insolvency process. It is often used in circumstances in which we in the UK would use the term insolvency. 

Need insolvency assistance?

Our Corporate Restructuring team regularly acts in relation to insolvent companies or individuals. Our partners are licensed insolvency practitioners with expertise in and many years of experience of all types of insolvency.

If you require advice on any of the issues raised in this article, please contact one of our Corporate Advisory partners.