What Is an Insolvency Practitioner?

Most insolvency practitioners (IP) will have trained as accountants or insolvency specialists, but specifically, what does an insolvency practitioner do? Put simply, an insolvency practitioner is a person who is licensed and authorised to act with regards to individuals, partnerships or companies that are insolvent.

For more information on what is an insolvency practitioner, you should know that, at first, the following simple rules apply. An insolvency practitioner must have:

  • Gained experienced working within the insolvency industry
  • Passed the relevant insolvency exams (JIEB exams)
  • Gained approval from an authorised regulatory body – recognising they are fit and proper to act officially as an insolvency practitioner
  • Obtained a licence

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Four Key Questions on what is an insolvency practitioner

What Does an Insolvency Practitioner Do?

As an insolvency practitioner is appointed to a company during times of trouble, the roles are essentially that of attempting to rescue the business. Once all avenues have been explored to save a business an IP will consider the alternative options in the circumstances. The duty an insolvency practitioner holds is to act with reasonable care and controlled skill when carrying out tasks, and to act in the best interests of creditors at all times.

This may include; selling the assets of the company or individual who owes money, collecting any money that is due to the company or individual, agreeing claims with any creditors’, and distributing all collected money once costs have been taken into account. All avenues should be explored to ensure potential buyers are exposed to the assets in an informed and practical way, with assets realised for the maximum value.

Once the details of claims from creditors have been received and adjudicated upon, the IP can begin to chase a dividend, but this will only take place if the funds are available. It can be challenging to balance the interests of the debtor and their creditors, ensuring that the highest possible funds are released to the creditors. If an insolvency practitioner has been appointed as an advisor to a company board, prior to when a formal insolvency process has begun, they will provide advice to the directors and set out their responsibilities at this time.

Depending on the insolvency process, the IP may be required to carry out investigations into the Company’s affairs, and the conduct of any director in office in the three years prior to the date of insolvency. The investigation stage of the process therefore is vital, and it is imperative that the insolvency practitioner is of the highest calibre. They will submit a report to the Insolvency Service, which will include any elements of unfit conduct.

 

What Roles Could an Insolvency Practitioner Hold?

Within a company that has gone into insolvency, an insolvency practitioner could be appointed to a number of roles. This could be the role of provisional liquidator, a liquidator, administrator, administrative receiver, the supervisor of a CVA (Company Voluntary Arrangement) or indeed, an advisor to the board of company directors to guide them through the process of insolvency.

Depending on the precise role an insolvency practitioner is appointed within a company, the role will be performed in order to liaise with creditors, negotiate terms and realise assets. If a company is in decline and heading towards insolvency, an insolvency practitioner can be brought on board to advise and put in place preventative measures to ward off insolvency.

 

What are the Specific Duties of an Insolvency Practitioner?

So, what is an insolvency practitioner tasked to do in terms of specific duties? We’ve read about the general duties, but what about the specific tasks and duties that they are expected to perform and fulfil? Each role undertaken by an IP within a company will have a slightly different remit:

Provisional Liquidator – This role is taken up in order to help preserve the assets of a business that is in trouble of facing insolvency. An insolvency practitioner will be tasked with safeguarding the creditors, ensuring that all assets that could be available once the insolvency process begins are still in place when it, in fact, begins. The provisional liquidator does not take part in the realisation process of the assets.

Liquidator – The insolvency practitioner in this role undertakes the realisation of company assets. This is with a view to distributing all funds equally between the listed creditors. In a compulsory liquidation, or creditors’ voluntary liquidation, the liquidator will have full control of all aspects of the company, winding up the company affairs and investigating the conduct of all directors. For a solvent liquidation the insolvency practitioner has a duty to distribute all funds equally amongst members and can arrange for all creditors and members to vote on whether the liquidation proposal should be accepted or not.

Administrator – A company administrator will be brought on board for a number of reasons; to rescue the company, to achieve the best possible outcome for all creditors if the company cannot be saved and must be liquidated, or if both are unachievable, to realise the company’s assets in order to pay the secured and preferential creditors.

Administrative Receiver – This role is undertaken on behalf of a secured creditor (for example a bank), and is aimed at realising the company assets with the view of making a repayment to the secured creditor.

Supervisor of CVA – These duties are aimed at ensuring the terms of a Company Voluntary Arrangement (CVA) are met fully, with monthly payments distributed fairly between creditors as per the agreement.

 

HOW DO I FIND THE RIGHT Insolvency Practitioner?

We hope that, as you have explored some of the key details on the topic of what is an insolvency practitioner, you will feel a lot more informed on the nature of the role and how it may be of benefit to your business at the present time. If you need any further help and guidance however we are happy to help.

The Insolvency Experts offer personable and professional advice that can help you safeguard your company. We are available to talk with you through your questions and specific business situation today, via email or telephone. We have helped a wide range of businesses within many different industries to gain a greater control over the destiny of the business during troubled times.

How we’ve helped others through
rescuing their business

At the Insolvency Experts our sole aim is to rescue, recover and renew businesses that are in difficulty. We are specialists in corporate turnaround and help business overcome cash flow difficulties and other financial problems. Our experts:

  • Help you to take the appropriate steps to meet any impending deadlines
  • Have a long track record in helping companies in similar positions
  • Can help you take the best course of action, often using your assets to help you avoid additional cost

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Why Choose Us?

We understand you have already made every effort to avoid insolvency and day to day life is stressful at the moment. We can start immediately and quickly work with you through the process.

We see many examples of great businesses that have fallen on hard times or suffered through no fault of their own.

We understand that the company directors and shareholders have already tried valiantly to carry on trading, but circumstances dictate that this is no longer possible.

  • We Remove Stress
  • We Act Quickly
  • We Are Cost Effective
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