An Insolvency Practitioner (IP) is a professional who is authorised, and licensed, to act in the interests of an insolvent company, partnership or individual. In respect of a company, they aim to either rescue it or wind it down in a fair manner to maximise the interest of all the creditors according to the law. They carry out their work in accordance with the Insolvency Act 1986 and the rules of their regulatory authority such as the Insolvency Practitioners Association (IPA), the ACCA, ICAEW, or the ICAS.
Should I appoint an Insolvency Practitioner?
Directors are most likely to get in touch with an insolvency practitioner if they are worried about the financial situation of their company. They may face serious legal threats from suppliers, banks, HMRC, and may even face petitions to wind their company up. It might be that bailiffs have visited the registered office.
An insolvency practitioner may also be appointed by the court, where a petition to wind the company up has come from a creditor. In addition, a secured creditor, such as the bank or factoring company, can appoint an insolvency practitioner as an administrator i.e. put the company into administration resulting in you losing all control.
So, it is generally advisable to seek the services of an insolvency practitioner as soon as you are aware that your company is insolvent. If you are not quite sure if this is the case, then read our Insolvency tests page.
What are the roles of an insolvency practitioner?
Liquidator
Once a liquidator is officially appointed, they oversee the closing down the business and investigating the circumstances that led to the company’s insolvency.
Their main purpose is to convert any remaining assets into cash and pay as many creditors as possible with those funds, hoping to pay dividends too. However, some creditors may not see a return due to liabilities that outweigh the financial worth of the remaining assets. Liquidators ensure creditors are all treated in accordance with their legal rights.
A liquidators role involves a variety of tasks: arranging meetings, completing paperwork and investigating the directors’ conduct.
Administrator
When a company goes into administration, the insolvency practitioner effectively runs the company for the benefit of the creditors. They will try and sell the business assets. If there are no takers, then they will wind down the company. Administration’s primary aim is rescue and it needs to have a better result than liquidation for the creditors as it is a complex and more costly process.
Nominee and Supervisor of a company voluntary arrangement.
A company voluntary arrangement (CVA) is an insolvency process that allows a company to pay off a proportion of its debts over an extended period of 3-5 years. The arrangement must be agreed by the creditors. The role of the IP as a nominee is to ensure that the proposed CVA is “fit, fair and feasible. As such they need to be satisfied that the company has a reasonable prospect of rescue and can afford the payments to the creditors. As supervisor, the insolvency practitioner is responsible for collecting the payments from the company to pay back the creditors, known as a dividend. If the company cannot pay, then the supervisor will wind up the company as liquidator.
What are the qualifications needed to be an insolvency practitioner?
An insolvency practitioner will have passed the Joint Insolvency Examination Board (JIEB) exams which are known to be very tough. Due to the financial nature of insolvency most practitioners will have extensive experience as an accountant and may well be qualified either by the ACCA, ACA and CIMA. One particular reason why insolvency practitioners need to be well qualified is that it should be remembered that an IP acts in their personal capacity when dealing with insolvent companies. They are not protected by the company they work for. When taking appointments they have to take out an insurance policy to protect creditors from losing out if they are negligent or criminal.
How can I find an insolvency practitioner?
Most insolvency practitioners work at a firm such as us KSA Group. Be wary that many people offering advice to insolvent companies are not actually licensed to take on appointments but will just take some fees and then you will end up having to appoint one anyway or you firm will be wound up by the court. To check if someone is actually licensed then you can search the
https://insolvency-practitioners.org.uk/ipa-search-members/
https://www.icas.com/find-a-ca
https://www.gov.uk/find-an-insolvency-practitioner
