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Glossary of Terms

Glossary of Terms

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Having trouble with business terminology? We're here to help, below we have highlighted some of the most commonly used business phrases to help you.


A

Abbreviated Accounts

These are a trimmed down version of the full annual accounts which can be submitted by small and medium sized companies to the Registrar of Companies. Full annual accounts must be distributed to all members.

Accounting Reference Date

According to Section 224 of the Companies Act 1985, the Accounting Reference Date is when a company's financial year finishes.

Accounts

The standard term given for the financial documents UK companies are required to file each year by law. These accounts will usually be comprised of an Auditor's Statement, a Balance Sheet, a Director's Report and a Profit and Loss account. Companies who fail to submit their accounts on time can be heavily penalised by Companies House with fines and in extreme cases dissolved.

Acquisition

The process of one company purchasing the assets of another company.

Administration Order

Administration order is when a person, 'the administrator', is appointed to manage a company's affairs, business and property for the benefit of the creditors. The person appointed must be an insolvency practitioner and has the status of an officer of the court (whether or not he or she is appointed by the court).

The objective of administration is to:
Rescue a company as a going concern;
Achieve a better price for the company's assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the company were wound up (without first being in administration);
In certain circumstances, realise the value of property in order to make a distribution to one or more preferential creditors.

Alternate Director

During a period of absence a Board can appoint someone to act on their behalf.

Annual Accounts

All limited companies must submit accounts annually whether they are trading or not. The extent of the accounts filed depends on the size of company - small and medium companies along with non trading and audit exempt companies can claim exemption from filing a full Profit and Loss Account and Balance Sheet.

Annual General Meeting (AGM)

An annual meeting of a company's shareholders to review the dealings of a company.

Annual Return

A summary of a company's activity, capital structure, current directorships and shareholders. These must be submitted to Companies House annually.

Annual Return Date or ARD

Annual Returns must be submitted within 28 days of this date

Assets

Assets are economic resources. Whether Tanigble or Intangible, assets have the ability to be owned or controlled to produce value for the company.

Assurance company

Assurance companies are not required to file information with Companies House. Often Assurance companies have an equivalent Limited or PLC entity.

Audit

Each year a qualified accountant must make an inspection of a company's balance sheet to ensure it reflects a true state of a company's affairs. This is required by Companies House.

Auditors Report

Part of the Annual Accounts, the Auditors Report contains an accountant's view of the accuracy of a company's financial statements.

Authorised Capital

This refers to the amount of capital that a company can raise by the sale of shares.


B

Bad Debt

A debt that cannot be recovered from a debtor, this is usually because the debtor cannot be located or they do not have means by which to pay.

Balance Sheet

A summary of a company's financial position. It includes a company's assets, liabilities and equity as of a specific date.

Bankruptcy

A legally declared or recognised condition whereas a person or organisation is unable to pay their creditors.

Board

Refers to the directors of a company.

Board Meeting

A meeting of the company's directors.

Bonus Issue

A shareholder may receive bonus shares if a company decides to distribute surplus profits into shares. Also known as Scrip Issue.


C

Call

When shares are distributed, shareholders may have the option to pay for them by instalments. Each instalment is known as a 'Call'.

Called Up Share Capital

This is the issued and paid share capital from shareholders.

Capital

Assets available to a company.

Cashflow

The movement of cash / funds through a business.

Certificate of Incorporation

A certificate issued by the Registrar of Companies. A company can begin trading from the date shown on this certificate.

Certified Accountant

A professional member of the UK's Association of Chartered Certified Accountants (ACCA).

Chairman

The person who supervises members and Board Meetings.

Charge

When a company borrows money the lender may require a form of security. This will usually take the form of a legal document entitling the lender to take ownership of a company's assets if the debt is not paid. This security is known as a 'charge'.

Close Company

A company that is under the control of five or less people.

Collection Period

The average time taken for a company to pay its' debts.

Companies Act 2006

Formerly the Company Law Reform Bill, the Companies Act 2006 replaces the existing company legislation with the exception of provisions relating to company investigations and community interest companies.

Companies House

Companies House is a UK Government organisation that holds all information on limited companies in the UK.

Company Credit Reports

Company Credit Reports are affordable, high quality comprehensive reports giving you access to all of the information you require to make informed business decisions. The information within Creditsafe UK reports is sourced directly from Companies House, The Registry Trust and The London & Edinburgh Gazette and is updated daily.

Company Identity Theft

Criminals will fraudulently amend a company's registered details in order to obtain money, or goods and services fraudulently or to attack your bank account.

Company Name

The name registered with Companies House. Only one company can hold a specific name at any one point. This name however can be changed at any time.

Company Number

The number registered with Companies House. Company numbers stay with a company and cannot be changed.

Company Secretary

Every company must have a company secretary or assign the duties of a company secretary to a director. These duties include ensuring all company documents are filed with Companies House.

Consumer Reports

Consumer Reports allow access to the information you require to assess the likelihood of your customer being able to fulfil their credit commitments. Information includes: Applicant's name, address, bankruptcies, insolvencies and CCJ's.

Contract

A legally binding agreement between two or more people / organisations.

Contract Limit

A yardstick for the maximum contract capacity on a single contract over a 12-month period. This measurement views the applicant as a supplier of goods and services whereas a credit limit assesses the applicant as a purchaser.

Convertible Shares or Stock

If the Articles allow, a company may, by resolution, convert one class of one type of its shares into another class or into stock or vice versa.

Cost of Sales

The direct cost of goods and services supplied.

County Court Judgment (CCJ)

A County Court Judgment is an order from the County Court for a person or company to pay an outstanding debt. These usually include non payments of loans or mortgages etc. County Court Judgments stay on a person's / company's credit report for 6 years however if they are paid off then they will show as 'satisfied'. It is possible to erase a CCJ before this, if the CCJ is paid in full within one month of being issued.

Credit Limit

This is the maximum amount of credit that should be offered to an organisation at any one time.

Credit Rating

Credit ratings are used to ascertain a company's overall credit worthiness. It is calculated by reviewing a person's / company's credit history.

Credit Score

The Creditsafe Credit Score, taking into account the current economic situation, calculates the probability of a company becoming insolvent in the next 12 months based on 15 different parameters. Creditsafe is one of the only companies within the industry to have taken the step of reviewing Credit Scores based on the downturn in the UK economy and we will continue to rigorously test and change our models to ensure that your company is protected against the threat of bad debt no matter what the economic circumstances.

Creditor

A person or company that is owed money or an entity that provides a loan or credit.

Creditor meeting

The normal purpose of a creditors' meeting is to inform the creditors of the financial position of the company, and report on the likely amount that can be realised by disposing of any assets. Such funds will be used to pay off secured creditors, preferred creditors and unsecured creditors in that order.

CTPS

An acronym for Corporate Telephone Preference Service. Much like the consumer telephone preference service, the CTPS allows companies to opt out of unsolicited sales and marketing calls. It is a legal requirement for companies not to contact companies that have signed up for the CTPS. Breaking CTPS holds a penalty fine of £5,000 per breach.


D

Data Cleaning

Creditsafe's data cleaning service can be used to ensure that company data is up to date and accurate. Company records are checked against the Creditsafe database which is updated on a daily basis.

Data Health Check

Our Free Data Health Check process will help you evaluate your data quickly and simply.  Whatever the size of your data file, whether it be 5,000 or 100,000 business records, we can run a check and provide you with a report detailing the quality of your data. The key areas assessed are the quality of the records, the authenticity of the data and the profile of your customers e.g. industry sector, employees and location. The Data Health Check will provide you with invaluable information about your database that is totally free of charge.

Debenture

Debentures are medium to long term instruments used by large companies in order to raise capital.

Debtor

A person or company that owes money.

Debtors Days

Trade Debtors / Turnover x 365 days. This is a calculation that predicts the average time taken for the company to collect its invoices for goods and services provided to its customers.

Deed

A legally binding document showing ownership. Deeds are usually used in the transfer of property.

Depreciation

The amount written off Fixed Tangible Assets during the year, including impairment charges.

Director

A director is a person who manages the affairs of a company on behalf of the shareholders. Every company must have at least one director.

Director (nominee)

A director nominated to represent substantial shareholders.

Director (Non-Executive)

Every company must have at least one director who manages company business on behalf of the shareholders and has a duty of care, skill and good faith.

Director Reports

Director Reports show personal information such as date of birth and address along with details of previous directorships (if applicable).

Directors Emoluments

Total payment made to directors for services as directors.

Dissolution

Dissolution is the final stage of liquidation, the process by which a company is formally brought to an end.

Dividend

A portion of a company's profits that is distributed to shareholders. The exact sum of money will depend on the shareholders stake.

Dormant

A dormant company is one that doesn't trade and has no accounting transactions. Small companies may choose to buy a dormant company to protect the name, or for other reasons. Trading companies may also elect to become dormant if they cease trading and may wish to trade again in the future. A Dormant company status can be checked either on Companies House or by checking the SIC code on the image account.


E

Edinburgh Gazette

An official newspaper of the United Kingdom, published twice a week the Gazette provides information on matters of state and also public finance notices including bankruptcies and insolvencies.

Employee

A person who is in direct employment for a business as opposed to a contractor / freelancer.

Executive Director

A Director with specific duties such as IT Director.

Extraordinary Resolution

A resolution requiring a majority vote of at least 75% at a general meeting, for example dealing with a Winding Up Petition.


F

Factoring

Factoring is a way of getting most of the money you are owed before your client actually pays up. As part of this arrangement, the factoring company also chases and collects the debt on your behalf, according to the terms and timeframes you agreed at the outset. This enables you to concentrate your time and efforts on growing your business, not worrying about credit control.

Finance Act

Introduced by the Chancellor of the Exchequer in the Budget speech a Finance Act will outline the tax laws for the country for the coming year.

Fixed Assets

Permanent assets required for the operation of a company such as a place of business or heavy equipment.

FSB

An acronym for Federation of Small Businesses.


G

Gearing

Usually shown as a percentage. Gearing is the relationship between the size of a company’s debt in proportion to equity (shareholders funds).

General Meeting

A meeting of the company's shareholders.

Gross Profit

A simple calculation: Turnover / Revenue minus the net cost of goods sold. Please note Gross Profit is different from Operating Profit.


H

Hard Bounce

A failure in the delivery of an email due to a permanent reason. The most common of these would be an incorrect email address.


I

Identity Fraud

Criminals will fraudulently copy or amend a person's details in order to obtain money or to attack a bank account.

Image Documents

Creditsafe are able to provide access to the full range of original scanned documents currently available at Companies House.

Incorporate

The process of legally forming a limited company. Once incorporated the company becomes its own legal entity.

Incorporation Date

The date a company is officially recognised by Companies House in the form of a Certificate of Incorporation.

Industrial / provident company

An industrial and provident society is an organization conducting an industry, business or trade, either as a co-operative or for the benefit of the community, and is registered under the Industrial and Provident Societies Act 1965.

Insolvency

A company will become insolvent when it no longer has the ability to pay its debts as they fall.

Instrument

Another term for a legal document.

Intangible Assets

Assets that cannot be physically touched such as knowledge and experience.

Interest Payable

Interest that is paid by a company.

Issued Capital

The percentage of a company's share capital that has been distributed to its members / shareholders.

Issued Shares

Shares for which payment has been received and certificates issued. The holders of these shares will be entered into the company's registry of members.


L

Lien

A type of security, a lien legally entitles a creditor to take ownership of a debtor's property and to sell it in order to repay an outstanding debt.

Limited by Guarantee

An alternative type of company that has no shareholders or share capital, as its members act as guarantors. The members will typically contribute a very small amount of money and this is all they are liable for. These are usually used in non-profit organisations such as charities.

Limited Company (Ltd)

A company organised so that the shareholders are limited to their liability depending on the amount of shares owned. This is the most common type of privately held companies in the UK.

Limited Liability Partnership

A partnership in which the partners have limited liability. They are regulated by the Limited Liability Partnership Act (2000).

Liquidation

The termination of a company in which its assets are sold off in order to pay off its creditors.

Liquidator

A person appointed by a Court in order to manage the liquidation of a company's assets.

London Gazette

An official newspaper of the United Kingdom, published twice a week the Gazette provides information on matters of state and also public finance notices including bankruptcies and insolvencies.


M

Managing Director

A director of a company who is given special powers by its articles of association.

Marketsafe

A subsidiary company of Creditsafe which has now been incorporated into the Creditsafe portfolio.

Media Solutions

Media Solutions from Creditsafe is an online media search and monitoring service combining company credit reports with media information from across all main Internet news sites. Using predetermined risk terms media solutions will alert you to any stories within the media that could signify a company you deal with is at risk, putting you fully in the picture to make informed business decisions.

Member

Someone who owns shares within a company and has been entered into the company's register of members.

Memorandum of Association

Often referred to as 'Memorandum', this document outlines the relationship between the company and the outside world. A Memorandum is required when incorporating a company within the UK and Ireland

Minutes

Official notes taken during shareholders' and directors' meetings.

Mortgage

A special form of secured loan usually used in the acquisition of property. The lender will use the property as security until the loan is repaid.


N

Net Worth

Often referred to as the 'book value' of a business. This is calculated by looking at the Total Shareholders' Funds minus the Intangible Assets of the business.

Non-trading company

The term ´Company not trading´ has no legal meaning. A non-trading company has no significant accounting transactions, which simply means no entries in the company´s accounting records. The company has stated in their accounts that it did not trade or ceased to trade in the last accounting period. Alternatively the company has filed a non trading or dormant SIC code.

Non-trading income

Income earned from non-trading practices such as investment income.


O

Operating profit

Calculated by deducting a company's operating costs from gross profit.

Ordinary Resolution

A resolution passed by the shareholders of a company by a simple or bare majority in order to increase authorised capital, remove an auditor or director, make bonus issues and subdividing shares.

Ordinary Share

The most common form of share capital representing the owners' interest in a company.

Over trading

Over trading takes place when a business accepts work and tries to complete it, but finds that fulfilment requires greater resources - ie more people, working capital or net assets - than are available. This is often caused by unforeseen events such as manufacture or delivery taking longer than anticipated, resulting in cashflow being impaired.


P

P&L Account Reserve

The accumulation of profits and losses from previous trading periods.

Preference Shares

In the event of liquidation these are the shares that would receive preferential treatment.

Preferential Creditor

These are the creditors who would be paid first in the event of a winding up.

Pre-Tax Profit

The profit or loss of a company before the deduction of Corporation Tax.

Private Company

A company that is not allowed by law to sell its shares to the general public.

Profit after Tax

The profit or loss of a company after the deduction of Corporation Tax.

Profit and Loss Account

Also referred to a P&L account, this document is used to summarise the income and expenses for a given period of time.

Prospect Data

Creditsafe prospect data includes a variety of information which can be used in Sales and Marketing campaigns allowing you to target the right companies and find new business quickly.

Proxy

An individual who has been granted the authority or power to act on another's behalf at shareholder meetings.

Public Limited Company (PLC)

A public limited company has the ability to sell its shares to the public. A PLC's shareholders are only liable for the amount they have invested in the company and are not liable for the debts incurred by the company.


Q

Quorum

The amount of shareholders required to hold a valid meeting.


R

Receiver

If a company fails to pay its debts to its secured creditors, they can appoint a receiver to take over the management of the company. The receiver has the ability to sell a company's assets or the business as a whole in order to recover enough money to pay the owed creditors. Receivers must be qualified as an insolvency practitioner and has the same authority as a liquidator.

Receivership

When a company is being managed by a receiver it is in receivership.

Redeemable Shares or Stock

Share capital that is issued on the provision that they will be bought back at a later date.

Register of Members

Under UK legislation, the register is used to detail the names and addresses of all shareholders along with the number and class of the shares they own.

Registered Office

Is the address which is registered with Companies House as the official address of the company.

Registrar of Companies

The person appointed to be responsible for Companies House. The Registrar of Companies for England and Wales is based in Cardiff and for Scotland, Edinburgh.

Registry Trust

A non-profit organisation that operates the Register of Judgements, Fines and Orders for England and Wales for the Ministry of Justice as well as similar registers for the British Isles.

Resolution

During company meetings shareholders can settle on a course of action by voting resolutions. Such resolutions may include appointing a director or paying dividends.

Retained profits

Retained profit is what is left after all deductions, and represents profits that are invested into the business.

Revaluation Reserve

Any unrealised gains on revaluations of Fixed Assets.

Rights Issue

A way in which an existing company can sell new shares in order to raise capital. Shares are offered to existing shareholders in proportion to their current shareholding at favourable terms.

Risk Tracker

Risk Tracker allows you to receive email updates when changes are made to one of your customers' credit information.


S

Scrip Issue

See Bonus Issue.

Share Capital

See Issued Capital.

Share Certificate

A document used to show the details of the shareholders. This is required when incorporating a limited company.

Shareholders

A person or company that owns a share or shares within a private or limited company.

Shareholder's Funds

The total of Called up Share Capital, P&L Account Reserve, Sundry Reserves and Revaluation Reserve.

SIC Code

An acronym for Standard Industry Classification. This code is used to describe a business's primary activity.

Stamp Duty

A tax that is paid in the UK when purchasing shares / assets.

Statutory Accounts

Annual accounts which must be audited and comply with UK company law.

Statutory Books

These books are required by law and should be kept at the company's registered office. They include information on the company's shareholders, directors etc. Companies House must be notified (in many cases) if there are any changes and these records must be made available for public inspection.

Stock

Goods on hand as yet to be sold and work in progress (goods not considered to be a final product).

Struck Off

Company has been removed from the register of live companies at Companies House and ceases to exist. These companies have no formal existence and are effectively a historical record of the once live company.

Sundry Reserves

The total of Capital reserves, Share premium account, any other related company reserves and capital grants.


V

VAT or Value Added Tax

An acronym for Value Added Tax. This tax applies to most goods and services that are supplied within the UK. At present this stands at 20%.

Voluntary Arrangement

Allows the company to continue trading under a binding agreement with its creditors. Agreement between an insolvent or financially-troubled debtor and its creditors, aimed at avoiding the liquidation of its assets. Under a voluntary arrangement, the entity continues its normal existence and pays off its debts over an agreed upon period, this may happen without or without any court-issued Administration Order.


W

Winding Up Order

The termination of a company.

Winding Up Petition

A winding up petition is a legal document that is submitted by the party or parties wishing to liquidate the company. These parties may be the directors of the company themselves, or may be a third party such as a creditor.

Working Capital

Calculated by deducting Total Current Liabilities from Total Current Assets. This represents the surplus/deficit of funds from normal trading activities.

Written Resolution

Instead of voting at a meeting this is a written form that is signed by either the shareholders or directors of a company. See Resolution.


X

XML

An acronym for Extensible Markup Language. If you are a large volume user, there is an opportunity for you to integrate Creditsafe Company Credit and/or business data into your own software, internal systems or web applications.


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