What is an Insolvency Practitioner?

What is the role of an Insolvency Practitioner?

An insolvency practitioner is a licensed professional who is qualified to act in matters of both company and personal insolvency. The role of an insolvency practitioner is to either bring about the turnaround of a distressed business, or else place the company into liquidation if closure is the only option. Finding an insolvency practitioner is vital if your company has begun experiencing financial problems or displaying signs of insolvency.

An insolvency practitioner can work with directors of distressed limited companies and advise on a range of formal insolvency procedures including Creditors’ Voluntary Liquidation (CVL), Company Voluntary Arrangement (CVA), and Company Administration.

Insolvency practitioners can also provide advice to individuals struggling with personal debt on processes including Individual Voluntary Arrangements (IVAs) and Bankruptcy.

Insolvency practitioners typically work either in the insolvency department of a legal or accountancy practice, or alternatively at a firm specialising in insolvency.

What does an Insolvency Practitioner do?

An insolvency practitioner’s exact duties vary depending on the nature of the appointment. Insolvency practitioners act as:

• Liquidators in shut-down liquidations
• Nominees and supervisors in Company Voluntary Arrangements and Individual Voluntary Arrangements
• Administrators for various forms of company administration including trading and pre-pack administrations
• Trustees in the bankruptcy of individuals and sole traders

In all cases, however, an insolvency practitioner will provide insolvency advice and guidance to directors and stakeholders of financially distressed companies as well as individuals. Once appointed, they will negotiate with creditors, arrange for the valuation and disposal of assets for the benefit of creditors, and ensure outstanding company matters are dealt with in accordance with the Insolvency Act 1986.

Despite their name, insolvency practitioners can also assist with the closure of solvent companies in order to ensure cash is extracted from the business in the most cost-effective way possible before it is closed down. This is done through a process known as a Members’ Voluntary Liquidation (MVL).

 

 

 

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How do I find an Insolvency Practitioner?

You can find an insolvency practitioner in a number of ways including online, a recommendation from your accountant, or through a search of the Insolvency Service website.

You should find an insolvency practitioner in whichever way you feel most comfortable. If you are wanting to keep your company's situation confidential, you can search online to find a reputable insolvency firm such as Real Business Rescue. When finding an insolvency practitioner online you should exercise caution to ensure you are speaking to a firm of licensed insolvency practitioners.

Alternatively you can find an insolvency practitioner through a recommendation by your solicitor or accountant if they have an existing working relationship with a local insolvency practitioner.

Who appoints an Insolvency Practitioner?

An insolvency practitioner can be appointed by a creditor, the courts, or by the directors of a distressed company. The party who initiates a formal insolvency process is the one responsible for paying the associated fees. If a disgruntled creditor begins insolvency proceedings against a company, the director will be served with a Winding Up Petition (WUP) which will start the process of the company being forced into compulsory liquidation.

In the majority of cases, however, it is the director themselves who enlists the help of an insolvency practitioner once they become aware that their company is in trouble.

Even if a company director appoints an insolvency practitioner themselves, it must be remembered than the insolvency practitioner is duty-bound to work in the best interests of outstanding creditors. While they will provide help, guidance, and assistance to directors of insolvent companies, their main concern will always be to realise the best returns for those the company owes money to.

“After submitting my '60 Second Test' I received a complimentary Insolvency Options guide packed full of useful information. The team of insolvency specialists phoned me back in less than 10 minutes after reviewing my details and guided me through the next steps. Really helpful! Thank you Sophie!”

Patricia 

 

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Sophie Schofield
Business Debt Expert

What should I be looking for when choosing an Insolvency Practitioner?

If you are considering liquidating your company, or are seeking insolvency advice, it is vital you use a licensed insolvency practitioner. There are some unscrupulous firms who offer insolvency advice despite not being appropriately qualified to do so. Be aware that anyone can call themselves an insolvency adviser or insolvency expert; however, only those who have passed the JIEB exams can legitimately call themselves a licensed insolvency practitioner.

Before appointing an insolvency practitioner check their qualifications and awarding body number to ensure you are using a fully licensed and regulated insolvency practitioner who is appropriately qualified to do the job. You can quickly verify you are choosing a licensed insolvency practitioner by entering their details on the Insolvency Service website. Any insolvency practitioner will be more than happy to provide you with the necessary details so that you can validate their qualifications; be wary if you are met with resistance when seeking this information.

What qualifications does an Insolvency Practitioner have?

Although some insolvency practitioners start their career in insolvency, many insolvency practitioners come from a legal or accountancy background. In order to become a licensed insolvency practitioner, an individual must pass a series of gruelling Joint Insolvency Examination Board (JIEB) exams.

Currently the exam comprises of two papers, one testing on personal insolvency matters, the other corporate insolvency. The exams test an individual’s knowledge of insolvency law and how this is put into practice. Even after passing the exams, hands-on experience of the job must be completed before a license to take insolvency appointments can be granted.

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Are Insolvency Practitioners regulated?

Corporate insolvency is a highly regulated industry and every licensed insolvency practitioner is overseen by a regulatory board to ensure professional standards and integrity is upheld. There are several recognised professional bodies which regulate the activities of insolvency practitioners including: Association of Chartered Certified Accountants (ACCA), Insolvency Practitioners Association (IPA), Institute of Chartered Accountants in England and Wales (ICAEW), Institute of Chartered Accountants in Scotland (ICAS).

Insolvency practitioners are subject to regular inspections by their licensing body. Typically taking place over a number of days, during the inspection a selection of randomly chosen current and past cases will be thoroughly assessed and recommendations for improvements given where necessary. Should an insolvency practitioner's work be deemed to fall below the required standards, their license can be revoked.

How much does an Insolvency Practitioner cost?

Most insolvency practitioners will offer a free initial consultation which will often include advice as to which insolvency process may be the most suitable in the company's current financial and operational position. If you decide to continue, there are costs involved in appointing an insolvency practitioner which will vary depending on the type of procedure.

While liquidations will involve a one-off fee, more complex restructuring processes such as administration and Company Voluntary Arrangements (CVAs) often require ongoing costs throughout the duration of the scheme. These fees will be built into the cost of the administration or CVA and will require creditor approval.

How can I find a cheap insolvency practitioner?

When looking for an insolvency practitioner, cheaper is not always best. While you may be quoted a cheap rate initially, you need to be aware of additional costs being added on at a later date, particularly if you have an overdrawn directors' loan account.

While a cheap quote from an insolvency practitioner may be tempting, it is good to remember that in many liquidation and formal insolvency processes, the costs of the insolvency practitioner are not actually paid directly by the company's director.

Instead, the insolvency practitioner's costs will typically be met by using company assets, such as vehicles, stock, or the debtor book, meaning the director will not be required to pay anything for the liquidation or administration process personally. However, in instances where company assets are not sufficient to fully cover the amount due, the directors will be responsible for paying these fees out of personal funds. 

How Real Business Rescue's Insolvency Practitioners can help

With licensed insolvency practitioners operating across over 100 offices across the country, Real Business Rescue are perfectly placed to provide the advice and guidance you need if your company is facing financial distress. Contact our team today on 0800 644 6080 to arrange a free no-obligation consultation with one of our licensed insolvency practitioners in your local area.