What is an Insolvency Practitioner?

An Insolvency Practitioner (IP) is a licensed professional who offers insolvency services to businesses and individuals who are in financial distress.

An IP is authorised to act on behalf of the individual or company, advising and undertaking appointments in formal insolvency procedures. They implement processes which help to repay what is owed and where possible to rebuild their financial security framework.

Insolvency

When a business has liabilities more than it has assets it is insolvent.  A company is also insolvent when it can’t pay what it owes to creditors; employees, suppliers, the bank, money lenders and HMRC.

Insolvency procedures include:

·      Liquidation – compulsory or voluntary (CVL)

·      Administration (ADM)

·      Company Voluntary Arrangement (CVA)

·      Individual Voluntary Arrangement (IVA)

·      Court Winding Up (CWU)

·      Solvent Liquidation (MVL)

·      Bankruptcy (BKY)

Who does an IP work for?

Insolvency Practitioners operate within the UK’s legal system and have extensive duties. Whilst they are hired by the company or individual in financial difficulty, principally, they are responsible to the insolvent company or individual’s creditors (the people or companies who are owed money) - not just the insolvent person or company.

What does an IP do?

Insolvency Practitioners have to balance various legal and ethical obligations with handling (often very difficult) communication with creditors, directors, and employees in the case of a company insolvency. They administrate their cases and work to obtain the best possible outcome for creditors. These situations are often intense and highly pressured requiring a great deal of skill.

• Creditors – the protection of creditor’s rights is one of an IP’s main responsibilities. Under the Insolvency Act 1986, IPs have a duty to treat creditors fairly and equally throughout the process and for notifying and then further communicating with them.
• Employees – there’s a risk of redundancy when a company becomes insolvent. An IP will assist the company’s employees through the process helping them through the preliminary stages by processing claims for outstanding wages and redundancy payments via the Redundancy Payments Service.
• Directors – an IP would investigate the conduct of the director/directors to establish if their actions had added to the failure of the company or unfavourably affected the creditors. A report is submitted to The Insolvency Service who may take it further and open an investigation. In turn, this could lead to director disqualification.
• Bankrupts - an IP would investigate the conduct of the Bankrupt to establish if their actions had added to their financial failure or unfavourably affected their creditors,  This could lead to a Bankruptcy Restrictions Order.

What are an IP’s qualifications?

Insolvency Practitioners are licensed and, in our case, monitored by the Institute of Chartered Accountants in England and Wales (ICAEW). Each IP will have taken Joint Insolvency Examination Board (JIEB) exams. They are also bound by a Code of Ethics upholding six essential principles of insolvency: integrity, objectivity, professional competence, due care, confidentiality and professional behaviour.

In summary

The IP role is a vital one. IPs are either part of larger accountancy firms or as in the case of Even Keel Solutions an independent firm not associated with any particular accountant.  

Smaller accountancy firms tend not to have dedicated IP departments and so will refer their clients in distress on to firms like ours. Companies and individuals may also seek our advice and services directly.

It's important to remember that not every meeting with and IP ends in putting a business through a formal insolvency procedure, an IP will always explore ways in which a business can be saved, the key is seeking the right advice at the right time.

If you’re experiencing financial distress in your business and need some help, please do get in contact with us for a no-cost initial and confidential conversation. Call us on 01202 237337.

We’re an experienced team with strong values. We like to understand your needs and ensure you have the best advice possible. We’re experts in all areas of insolvency; you can read more about us on our website here.

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