Reviewed: 19th April 2017
Obtaining professional advice is an important step when a company is experiencing financial difficulty. It can prevent a slide into insolvency, and make the difference between returning to profitability and being forced into liquidation
Your first inclination might be to seek help from your accountant, but a licensed insolvency practitioner has specific industry knowledge and experience that can benefit your company even more.
So what exactly is an IP and what can they do to initiate financial recovery for companies on the verge of failure, or indeed at any stage of business life?
Insolvency practitioners are often accountants or lawyers who are licensed and authorised to act on behalf of individuals and companies in financial distress. IPs are required to administer formal insolvency procedures, during which they perform a number of duties and roles.
An IP’s involvement is crucial when a company has unmanageable debt, and the fact that directors have brought them in demonstrates responsibility in dealing with their company’s debt situation.
From recommending alternative sources of funding, to negotiating with creditors for more time to pay, an IP uses their commercial understanding and professional judgement to identify a company’s best options.
To be certain of obtaining professional help, it is important to specify ‘licensed’ insolvency practitioner when carrying out an online search. To achieve ‘licensed’ status, a practitioner will have undergone specific training, passed insolvency examinations, and completed a period of practical work experience within the insolvency industry.
As a result, their actions are regulated as they are legally obliged to become members of a trade body. This provides a path for complaint if directors are unhappy with the conduct or advice provided by an IP.
In contrast, an insolvency ‘specialist’ or ‘expert’ will not be licensed or regulated, and there is little recourse for complaint should their advice or actions be questionable, or later found to be incorrect.
A licensed insolvency practitioner carries out a wide range of duties, including an advisory role to company directors. Although IPs sometimes provide advice to a struggling company prior to entering insolvency, once they are appointed as office-holder for a formal insolvency procedure, their duty is to place the interests of creditors first.
To summarise, the roles of an insolvency practitioner include:
With regard to an insolvency process, an IP will communicate with creditors, potentially negotiate terms for new repayment plans, or in the case of liquidation, sell company assets for the benefit of creditors.
In all cases, they must ensure that the assets are valued correctly, and marketed to a broad range of prospective buyers. An insolvency practitioner must also investigate the conduct of directors during the time leading up to insolvency, to ensure there was no wrongful or fraudulent activity.
Real Business Rescue can help if your company is in financial distress, or you simply wish to pre-empt financial problems in the future. We offer a free same-day consultation with one of our licensed insolvency practitioners with 55 national offices, and can quickly establish your needs.
Our main aim is always company rescue, and as part of Begbies Traynor Group, we have the business acumen and practical experience to make a crucial difference. Call one of our team to arrange your free consultation in complete confidence, and give your business the best chance of success.
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