Glossary
A
B
C
D
E
F
H
I
J
L
M
N
O
P
R
S
U
W
A
Accounts Receivable
Money owed by customers to vendors in exchange for goods or services rendered.
Affiliate Company
Two companies are affiliated when one owns less than a majority of the voting stock of the other or if both are subsidiaries of a third company.
Aggregate First Loss (Aggregate Deductible)
The total amount of claims payable during an insurance period, which are to be borne by the policyholder for their own account prior to indemnification by the insurer.
Arbitration
A consensual dispute resolution process where the parties agree to submit their disputes to be resolved by an arbitral tribunal composed by arbitrator(s) who is/are independent third party/parties appointed by or on behalf of the parties in dispute. Arbitration awards will be final and binding.
Assignment of Debt
Transfer of debt and its rights and obligations to a third party.
Associate Company
A company whose shareholding is at least 20% but less than 50% owned by another company.
Money owed by customers to vendors in exchange for goods or services rendered.
Affiliate Company
Two companies are affiliated when one owns less than a majority of the voting stock of the other or if both are subsidiaries of a third company.
Aggregate First Loss (Aggregate Deductible)
The total amount of claims payable during an insurance period, which are to be borne by the policyholder for their own account prior to indemnification by the insurer.
Arbitration
A consensual dispute resolution process where the parties agree to submit their disputes to be resolved by an arbitral tribunal composed by arbitrator(s) who is/are independent third party/parties appointed by or on behalf of the parties in dispute. Arbitration awards will be final and binding.
Assignment of Debt
Transfer of debt and its rights and obligations to a third party.
Associate Company
A company whose shareholding is at least 20% but less than 50% owned by another company.
B
Balance Sheet
A financial statement showing assets and liabilities of a business at a certain date. The balance sheet forms a part of the financial accounts of a company and is normally prepared annually.
Bank Reference
A statement made by a bank usually to another, generally regarding the credit status of a bank customer.
Bankruptcy
Legal procedure for liquidating a business which cannot fully pay its debts out of its current assets. Bankruptcy can be brought upon itself by an insolvent debtor or it can be forced on court orders issued on creditors’ petition.
Bill of Lading
An important document in international trade that provides evidence of receipt of goods by the shipper, which gives details of the conditions of transport and normally conveys title to the goods.
Buyer / Commercial Risk
The risk of deterioration in the creditworthiness or financial situation of a buyer, resulting in non-payment of the buyer, not caused by circumstances or occurrences defined as country risk, such as bankruptcy or insolvency and payment default
A financial statement showing assets and liabilities of a business at a certain date. The balance sheet forms a part of the financial accounts of a company and is normally prepared annually.
Bank Reference
A statement made by a bank usually to another, generally regarding the credit status of a bank customer.
Bankruptcy
Legal procedure for liquidating a business which cannot fully pay its debts out of its current assets. Bankruptcy can be brought upon itself by an insolvent debtor or it can be forced on court orders issued on creditors’ petition.
Bill of Lading
An important document in international trade that provides evidence of receipt of goods by the shipper, which gives details of the conditions of transport and normally conveys title to the goods.
Buyer / Commercial Risk
The risk of deterioration in the creditworthiness or financial situation of a buyer, resulting in non-payment of the buyer, not caused by circumstances or occurrences defined as country risk, such as bankruptcy or insolvency and payment default
C
Cash against Documents (CAD) / Cash on Delivery (COD)
A payment arrangement in which the seller retains title and control of the goods after the shipment. The goods will be released to the buyer or a party designated by the buyer after full payment has been received by the seller.
Chapter 11 of the US Bankruptcy Act
When a debtor in USA is unable to pay his debts, he may, under Chapter 11 of the Bankruptcy Act apply to a Bankruptcy Court for protection against complete bankruptcy, submitting at the same time a plan for paying his debt, which is normally less than the amount due, and over a period of time. If the application is approved, the Court will allow the stay of any litigation and execution of any judgment against the debtor.
Chapter 7 of the US Bankruptcy Act
Chapter 7 of the US Bankruptcy Act deals with involuntary bankruptcy proceedings in the United States. Such proceedings become necessary when creditors do not accept the re-payment plan of the debtor proposed under Chapter 11. The Bankruptcy Court would then adjudicate the debtor a bankrupt under Chapter 7, and a compulsory winding-up of the debtor would follow.
Claim (Notice of Claim)
An application by the policyholder to the insurer for indemnification of a loss covered under the policy.
Claw-back If it is discovered that the policyholder has given any false, fraudulent or misleading information in connection with any claim lodged under the policy or that the policyholder has not complied with his obligation relating to recoveries, all payment made by the insurer must be repaid to the insurer.
Collateral
Property or other assets that a borrower offers a lender to secure a loan.
Consignment
Possession of goods by a consignee with the obligation to pay the consignor after the sale of goods to a third party or the consignee’s own consumption of the goods.
Contract Repudiation
The commercial risks that arise from: (1) the buyer’s cancellation of sales contract before the shipment of goods; or (2) the buyer’s failure to take delivery of goods after the shipment.
Counterclaims
A “cross” action which is not a defence, which allows the defendant in the original proceedings to make a claim against the person suing him.
Credit Insurance
Insurance that protects a seller of goods or services from the risk of default/bad debt of its accounts receivable arising from trade.
Credit Limit
The maximum amount of loss that an insurer may be liable on a particular buyer. It may contain additional conditions of cover forming part of the policy.
A payment arrangement in which the seller retains title and control of the goods after the shipment. The goods will be released to the buyer or a party designated by the buyer after full payment has been received by the seller.
Chapter 11 of the US Bankruptcy Act
When a debtor in USA is unable to pay his debts, he may, under Chapter 11 of the Bankruptcy Act apply to a Bankruptcy Court for protection against complete bankruptcy, submitting at the same time a plan for paying his debt, which is normally less than the amount due, and over a period of time. If the application is approved, the Court will allow the stay of any litigation and execution of any judgment against the debtor.
Chapter 7 of the US Bankruptcy Act
Chapter 7 of the US Bankruptcy Act deals with involuntary bankruptcy proceedings in the United States. Such proceedings become necessary when creditors do not accept the re-payment plan of the debtor proposed under Chapter 11. The Bankruptcy Court would then adjudicate the debtor a bankrupt under Chapter 7, and a compulsory winding-up of the debtor would follow.
Claim (Notice of Claim)
An application by the policyholder to the insurer for indemnification of a loss covered under the policy.
Claw-back If it is discovered that the policyholder has given any false, fraudulent or misleading information in connection with any claim lodged under the policy or that the policyholder has not complied with his obligation relating to recoveries, all payment made by the insurer must be repaid to the insurer.
Collateral
Property or other assets that a borrower offers a lender to secure a loan.
Consignment
Possession of goods by a consignee with the obligation to pay the consignor after the sale of goods to a third party or the consignee’s own consumption of the goods.
Contract Repudiation
The commercial risks that arise from: (1) the buyer’s cancellation of sales contract before the shipment of goods; or (2) the buyer’s failure to take delivery of goods after the shipment.
Counterclaims
A “cross” action which is not a defence, which allows the defendant in the original proceedings to make a claim against the person suing him.
Credit Insurance
Insurance that protects a seller of goods or services from the risk of default/bad debt of its accounts receivable arising from trade.
Credit Limit
The maximum amount of loss that an insurer may be liable on a particular buyer. It may contain additional conditions of cover forming part of the policy.
D
Date of Loss
The date on which an insured loss occurred.
Debt Collector
An agency that pursues debtors and seeks recovery of the funds they owe.
Default
The failure of a buyer to make contractually due payments.
Defendant
The person against whom a civil action is brought; the person being accused or charged with a criminal offence in a criminal prosecution.
Delivery
The placing of the goods on the hands of to the buyer or any person acting on its behalf according to the terms specified in the sales contract.
Discretionary Credit Limit
The maximum amount of credit limit which the policyholder may set for a buyer without prior approval by the insurer, subject to certain terms and conditions specified by the insurer.
Dispute
A disagreement between the policyholder and the buyer related to any obligations owed by either the policyholder or the buyer under the sales contract that may result in buyer’s refusal of payment or admittance of debt.
Document against Acceptance (DA)
A payment arrangement in which an exporter instructs a bank to hand over shipping documents to the buyer only if the latter accepts the accompanying bill of exchange or draft by signing it.
Document against Payment (DP)
A payment arrangement in which the bank releases the shipping documents to the buyer only against a cash payment in a prescribed currency.
Dormant Company
A company that has either never started or ceased its trading activities, but has not yet been dissolved.
Due Date
The date that payment is due by the buyer in accordance with the relevant sales contract.
The date on which an insured loss occurred.
Debt Collector
An agency that pursues debtors and seeks recovery of the funds they owe.
Default
The failure of a buyer to make contractually due payments.
Defendant
The person against whom a civil action is brought; the person being accused or charged with a criminal offence in a criminal prosecution.
Delivery
The placing of the goods on the hands of to the buyer or any person acting on its behalf according to the terms specified in the sales contract.
Discretionary Credit Limit
The maximum amount of credit limit which the policyholder may set for a buyer without prior approval by the insurer, subject to certain terms and conditions specified by the insurer.
Dispute
A disagreement between the policyholder and the buyer related to any obligations owed by either the policyholder or the buyer under the sales contract that may result in buyer’s refusal of payment or admittance of debt.
Document against Acceptance (DA)
A payment arrangement in which an exporter instructs a bank to hand over shipping documents to the buyer only if the latter accepts the accompanying bill of exchange or draft by signing it.
Document against Payment (DP)
A payment arrangement in which the bank releases the shipping documents to the buyer only against a cash payment in a prescribed currency.
Dormant Company
A company that has either never started or ceased its trading activities, but has not yet been dissolved.
Due Date
The date that payment is due by the buyer in accordance with the relevant sales contract.
E
Endorsement
An insurance policy document which varies or supplements the terms and conditions of the policy
Event of Loss
An event that causes monetary loss to the policyholder who has the right to file an indemnity request with the insurer.
Exchange Rate Risks
The risk of fluctuations in the currency exchange rate which results in the monetary loss of a company.
An insurance policy document which varies or supplements the terms and conditions of the policy
Event of Loss
An event that causes monetary loss to the policyholder who has the right to file an indemnity request with the insurer.
Exchange Rate Risks
The risk of fluctuations in the currency exchange rate which results in the monetary loss of a company.
F
Factoring
A financial transaction whereby a business sells its accounts receivable to a third party i.e. a factoring house or a bank who then manages the collection of the receivable.
A financial transaction whereby a business sells its accounts receivable to a third party i.e. a factoring house or a bank who then manages the collection of the receivable.
H
Holding Company
Under the Companies Ordinance of Hong Kong, a body corporate is a holding company of another body corporate if— (1) it controls the composition of that other body corporate’s board of directors; (2) it controls more than half of the voting rights in that other body corporate; or (3) it holds more than half of that other body corporate’s issued share capital.
Under the Companies Ordinance of Hong Kong, a body corporate is a holding company of another body corporate if— (1) it controls the composition of that other body corporate’s board of directors; (2) it controls more than half of the voting rights in that other body corporate; or (3) it holds more than half of that other body corporate’s issued share capital.
I
Income Statement
A financial statement that gives operating results, such as sales revenue, operating income and net income for a specific period; also referred to as earnings report, operating statement and profit-and-loss statement.
Indemnity Percentage
The percentage of each insured loss that is indemnified by the insurer.
Insurance Broker
An independent intermediary who represents a policyholder or a prospective policyholder and acts on behalf of the policyholder or prospective policyholder in dealing with his insurance needs. Insurance brokers need to obtain authorisation from the Insurance Authority (IA) or become a member of a body of insurance brokers approved by the IA (either The Hong Kong Confederation of Insurance Brokers or Professional Insurance Brokers Association Limited).
Insured
Also known as Policyholder. The party that purchases the insurance policy and assumes rights and obligations under the policy.
Insurer
Also known as Insurance company. The party offering insurance cover in exchange of premium.
Irrevocable Letter of Credit (ILC)
Unalterable obligation of a bank assuring payment to a seller of goods or services, subject to documentary compliance. The LC issuing bank can only amend or cancel its undertaking under the LC if all parties to the LC consent to the change.
A financial statement that gives operating results, such as sales revenue, operating income and net income for a specific period; also referred to as earnings report, operating statement and profit-and-loss statement.
Indemnity Percentage
The percentage of each insured loss that is indemnified by the insurer.
Insurance Broker
An independent intermediary who represents a policyholder or a prospective policyholder and acts on behalf of the policyholder or prospective policyholder in dealing with his insurance needs. Insurance brokers need to obtain authorisation from the Insurance Authority (IA) or become a member of a body of insurance brokers approved by the IA (either The Hong Kong Confederation of Insurance Brokers or Professional Insurance Brokers Association Limited).
Insured
Also known as Policyholder. The party that purchases the insurance policy and assumes rights and obligations under the policy.
Insurer
Also known as Insurance company. The party offering insurance cover in exchange of premium.
Irrevocable Letter of Credit (ILC)
Unalterable obligation of a bank assuring payment to a seller of goods or services, subject to documentary compliance. The LC issuing bank can only amend or cancel its undertaking under the LC if all parties to the LC consent to the change.
J
Joint Venture
A partnership set up between two or more companies, usually joining specific areas of their activities together to enhance their capabilities and competitiveness in particular areas or markets or to undertake a specific project.
A partnership set up between two or more companies, usually joining specific areas of their activities together to enhance their capabilities and competitiveness in particular areas or markets or to undertake a specific project.
L
Letter of Authority (LA)
A written authorisation initiated by the policyholder requiring the insurer to pay directly to a financier (i.e. loss payee) all claims which may become payable under its policy.
Letter of Variation (LV)
An amendment of a policy or endorsement and is intended for adding, deleting and updating of the variables in the policy or the endorsement.
Limited Liability Company (LLC)
A corporate structure, mainly in USA, whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. It is a hybrid business entity having certain characteristics of both a corporation and a partnership/sole proprietorship.
Liquidation
This is process of “winding-up” or terminating a company, usually but not always, because of insolvency. The process involves the appointment of a Liquidator to sell off all the assets of the company, paying all the liabilities of the company, so far as possible, and distributing any remaining funds, if any, to the owners (shareholders). Liquidation may be Compulsory – as a result of a Court order, or Voluntary – following a meeting and resolution of the shareholders.
Liquidator
The person duly appointed to wind-up and settle the affairs of a company being would-up, the person usually being a qualified accountant of solicitor.
Liquidity
The excess of current assets over current liabilities in the balance sheet.
Loss Payee
A party to whom the policyholder has transferred its legal rights to receive a claim payment under a policy.
A written authorisation initiated by the policyholder requiring the insurer to pay directly to a financier (i.e. loss payee) all claims which may become payable under its policy.
Letter of Variation (LV)
An amendment of a policy or endorsement and is intended for adding, deleting and updating of the variables in the policy or the endorsement.
Limited Liability Company (LLC)
A corporate structure, mainly in USA, whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. It is a hybrid business entity having certain characteristics of both a corporation and a partnership/sole proprietorship.
Liquidation
This is process of “winding-up” or terminating a company, usually but not always, because of insolvency. The process involves the appointment of a Liquidator to sell off all the assets of the company, paying all the liabilities of the company, so far as possible, and distributing any remaining funds, if any, to the owners (shareholders). Liquidation may be Compulsory – as a result of a Court order, or Voluntary – following a meeting and resolution of the shareholders.
Liquidator
The person duly appointed to wind-up and settle the affairs of a company being would-up, the person usually being a qualified accountant of solicitor.
Liquidity
The excess of current assets over current liabilities in the balance sheet.
Loss Payee
A party to whom the policyholder has transferred its legal rights to receive a claim payment under a policy.
M
Maximum Liability
The maximum amount of claims payable by the insurer during a policy period.
Medium & Long Term Cover
Insurance cover for exports of products such as consumer durables, semi-capital goods, capital goods and production equipment which involve medium and long-term credit with a repayment period typically over one year.
The maximum amount of claims payable by the insurer during a policy period.
Medium & Long Term Cover
Insurance cover for exports of products such as consumer durables, semi-capital goods, capital goods and production equipment which involve medium and long-term credit with a repayment period typically over one year.
N
Nonrecourse Financing
An arrangement where a bank or factoring house either buys a debt from an exporter or finances its exports but agrees not to seek recovery from the exporter if there are repayment difficulties.
An arrangement where a bank or factoring house either buys a debt from an exporter or finances its exports but agrees not to seek recovery from the exporter if there are repayment difficulties.
O
Offshore Trade in Goods
Offshore trade in goods covers “merchanting” and “merchandising for offshore transactions” provided by establishments operating in Hong Kong. The goods involved in offshore trade activities are shipped directly from a party outside Hong Kong to another party outside Hong Kong without the goods passing through Hong Kong.
Open Account (OA)
A mode of payment whereby a seller ships the goods and all the necessary shipping and commercial documents directly to a buyer who agrees to settle the payment at a future date.
Offshore trade in goods covers “merchanting” and “merchandising for offshore transactions” provided by establishments operating in Hong Kong. The goods involved in offshore trade activities are shipped directly from a party outside Hong Kong to another party outside Hong Kong without the goods passing through Hong Kong.
Open Account (OA)
A mode of payment whereby a seller ships the goods and all the necessary shipping and commercial documents directly to a buyer who agrees to settle the payment at a future date.
P
Partnership
A partnership is an association of two or more persons to carry on a business for profit.
Payment Default
The failure of the buyer to meet their contractual payment obligations.
Payment Moratorium
A delay or suspension of payments, usually by a government, to the creditors.
Plaintiff
A person who brings a court action or lawsuit against another. In the case of commercial credit, the person or concern who takes another concern and/or person to court for non-payment of moneys alleged due.
Policy
The insurance contract entered between the insurer and the policyholder. The contract together with the Proposal, Schedules, Endorsements and any other documents issued under that contract constitute the Policy.
Policyholder
Also known as Insured. The party that purchases the insurance policy and assumes rights and obligations under the policy.
Preferential Debts
Preferential debts are local rates, income tax or other assessed tax, purchase tax, wages or salary, holiday pay and severance pay, national health insurance, etc. which, under the bankruptcy legislation of the country of the buyer, constitute a priority charge on the insolvent company’s assets. Preferential debts rank after secured debts with a fixed charge and costs of liquidation but before any debts under a floating charge and unsecured trade debts.
Proof of Claims / Debt
When a company becomes insolvent, the creditors are required to register details of the amount owing to them with the liquidator or trustee. Normally the registration must be done within a specified period of time and/or with the support of an affidavit.
A partnership is an association of two or more persons to carry on a business for profit.
Payment Default
The failure of the buyer to meet their contractual payment obligations.
Payment Moratorium
A delay or suspension of payments, usually by a government, to the creditors.
Plaintiff
A person who brings a court action or lawsuit against another. In the case of commercial credit, the person or concern who takes another concern and/or person to court for non-payment of moneys alleged due.
Policy
The insurance contract entered between the insurer and the policyholder. The contract together with the Proposal, Schedules, Endorsements and any other documents issued under that contract constitute the Policy.
Policyholder
Also known as Insured. The party that purchases the insurance policy and assumes rights and obligations under the policy.
Preferential Debts
Preferential debts are local rates, income tax or other assessed tax, purchase tax, wages or salary, holiday pay and severance pay, national health insurance, etc. which, under the bankruptcy legislation of the country of the buyer, constitute a priority charge on the insolvent company’s assets. Preferential debts rank after secured debts with a fixed charge and costs of liquidation but before any debts under a floating charge and unsecured trade debts.
Proof of Claims / Debt
When a company becomes insolvent, the creditors are required to register details of the amount owing to them with the liquidator or trustee. Normally the registration must be done within a specified period of time and/or with the support of an affidavit.
R
Receivership
When a concern or person has lent a company money, or a bank has granted borrowing facilities and a secured charge has been created, if the chargee finds the company cannot pay the interest due to them or cannot pay the sum involved at the due date etc., in many cases the terms of the charge give the chargee (the lender) the power to appoint an Administrative Receiver to protect his interests. Where there are no such powers, the chargee may apply to the Court for the appointment of an Official Receiver.
Risk Management
Determination of appropriate actions to minimize loss in the case of extensions of due dates, changes of payment terms and long overdue payments by the buyer.
When a concern or person has lent a company money, or a bank has granted borrowing facilities and a secured charge has been created, if the chargee finds the company cannot pay the interest due to them or cannot pay the sum involved at the due date etc., in many cases the terms of the charge give the chargee (the lender) the power to appoint an Administrative Receiver to protect his interests. Where there are no such powers, the chargee may apply to the Court for the appointment of an Official Receiver.
Risk Management
Determination of appropriate actions to minimize loss in the case of extensions of due dates, changes of payment terms and long overdue payments by the buyer.
S
Sales-by Cover
Extends the standard cover to insure the sales of goods by exporters’ subsidiary / associate in overseas markets, to their local or overseas buyers.
Secured Creditors
A creditor who holds title to an asset of his debtor, which can be held as security for a debt and sold if necessary to recover the debt (e.g. a company taking out a mortgage with a bank to create overdraft facilities, will put up its property as security for the bank to cover the eventuality of being unable to pay back any money borrowed.)
Extends the standard cover to insure the sales of goods by exporters’ subsidiary / associate in overseas markets, to their local or overseas buyers.
Secured Creditors
A creditor who holds title to an asset of his debtor, which can be held as security for a debt and sold if necessary to recover the debt (e.g. a company taking out a mortgage with a bank to create overdraft facilities, will put up its property as security for the bank to cover the eventuality of being unable to pay back any money borrowed.)
U
Unlimited Liability Company
A company is unlimited when each of its members including owners and partners is liable for the whole of its debts.
A company is unlimited when each of its members including owners and partners is liable for the whole of its debts.
W
Winding-up Order
An incorporated company itself, a creditor, a contributory, or an official receiver may present a petition for winding-up a company. If the petition is sanctioned by a Court, a “Winding-up Order” would be issued.
Winding-up Petition
A petition presented to the Courts by a person or company who wishes for another company to be wound-up and enter into compulsory liquidation. In many cases one company will petition to wind up another because it is owed money and cannot recover the debt.
An incorporated company itself, a creditor, a contributory, or an official receiver may present a petition for winding-up a company. If the petition is sanctioned by a Court, a “Winding-up Order” would be issued.
Winding-up Petition
A petition presented to the Courts by a person or company who wishes for another company to be wound-up and enter into compulsory liquidation. In many cases one company will petition to wind up another because it is owed money and cannot recover the debt.