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Glossary of Credit Management Terms. Letter L

Late Payment of Commercial Debts (Interest) Act 1998:
This Act was introduced to encourage purchasers to pay on time by giving businesses the right to claim statutory interest if another business pays its bills late. For debts pertaining to contracts made between 1st November 1998 and 6th August 2002, the legislation is referred to as the Late Payment of Commercial Debts [Interest] Act 1998. For debts pertaining to contracts made on or after 7th August 2002, the legislation is referred to as the Late Payment of Commercial Debts [Interest] Act 1998, as amended and supplemented by the Late Payment of Commercial Debts Regulations 2002

Law of Property Act Receivership (LPA):
An LPA receiver is appointed by a lender who has a fixed charge over the property under the statutory power given in section 109 Law of Property Act 1925. The powers of the LPA receiver are as follows:

• To demand and recover rent;
• To give receipts for income;
• To insure any property against loss or damage;
• To grant a lease over the property at the best reasonably obtained rent;
• To accept a surrender of a lease in order to grant a new lease;
• In a well-drafted mortgage the above powers are extended and would allow the receiver to take control of the property and act as he/she considers fit with the consent of the mortgagee.

Leveraged buy-out:
Where the ownership of a company changes through a party or number of parties acquiring the controlling interest of the company using borrowed funds, giving the assets of the company as security. Repayment is made using future trading profit. Some consultancy firms are beginning to specialise in this area.

Limited company:
A company in which the liability of the members in respect of the company’s debts is limited. It may be limited in shares, in which case the liability of the members on a winding-up is limited to the amount (if any) unpaid on their shares. This is by far the most common type of registered company. The liability of the members may alternatively be limited by guarantee; in this case the liability of the members is limited by the memorandum to a certain amount which the members undertake to contribute on winding-up. The latter are usually societies, clubs, or trade associations. Since 1980 it has not been possible for such a company to be formed with a share capital, or converted to a company limited with a share capital. It is a popular form of company, because if the company becomes insolvent the winding-up of the company will not bankrupt any of the members.

Limited liability:
The liability of shareholders in a limited liability company, private or public, is limited to the face value of the shares held. If therefore, the shares are fully paid, the shareholder has no liability for the debts of the company. If the shares are partly paid, the liability is limited to the unpaid (face) value of the shares.

Limited liability company:
Another term for a limited company.

Limited liability partnership:
A limited liability partnership is a general partnership that has been registered with the Secretary of State as a limited liability partnership. A partner is not liable for professional malpractice that does not involve that partner.

Liquidation:
The term used to describe the winding up of a company, usually by reason of an inability to pay its debts, regulated by the Insolvency Act 1986. It involves the realisation of the company’s assets and the distribution of any proceeds to its creditors.

Liquidator:
The insolvency practitioner duly appointed to wind up and settle the affairs of a company being wound-up.

Liquidity:
The excess of liquid assets over liquid liabilities.

London Gazette:
This is an official British Government publication. In addition to containing information such as official Government announcements, it also lists details of bankruptcy proceedings, dissolutions of partnerships, winding-up orders against companies, notices under Section 652 of the Companies’ Act, Voluntary liquidations, etc.

Long firm:
A term used to describe a swindling organisation, in business for the purpose of obtaining goods on credit, selling the proceeds, (frequently under cost) and then absconding or failing, without having paid.

Long-term debt:
Amounts not falling due for payment within 12 months of the balance sheet date. This is a long-term liability.

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