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Duties of an insolvency practitioner?

Understanding the duties, responsibilities and role of a licensed insolvency practitioner in the UK.

Licensed Insolvency Practitioners in Preston, Lancashire.

 

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Published: 7th February 2021

If your business is undergoing financial hardship? You may be contemplating either appointing an insolvency practitioner 0r wishing to discuss your companies’ issues to understand and guide you through your ongoing situation unless you have experience dealing with an insolvency practitioner. Then you may be unsure what exactly they are doing and what their duties are once you appoint someone to support you and your business. So, as a director of a limited company. It is essential that you know the roles and responsibilities of an insolvency practitioner. It comprehends the value they may offer your business, especially in the early stages of financial difficulties.

It is important to note, to write off company debt requires an Insolvency practitioner formally appointed.

What is an insolvency practitioner?

An insolvency practitioner (IP)– is licensed to act on behalf of companies and individuals when facing Insolvency or acute financial distress. An IP helps company directors of companies which are solvent requiring a liquidation using a Members’ Voluntary Liquidation (MVL) to extract retained profits within the company including cash and assets.

Usually, a company director freely approaches an IP and enlists their services to support their troubled company. 

With compulsory liquidation, the courts appoint the Official Receiver to act the liquidator provisionally. However, often a commercial Insolvency Practitioner will be appointed to progress the liquidation to closure.

Is a liquidator an insolvency practitioner?

Yes. To act as a Liquidator of a Limited Company in the UK requires a Licensed Insolvency Practitioner, regulated to act.

Acting as a liquidator remains just one of the roles an insolvency practitioner assumes depending on the scenario requiring assistance.

Acting on behalf of a limited company, this means IPs may act as:

  • Administrator – An administrator is an insolvency practitioner appointed to a company to ringfence a business from creditor action while: 
    1. Arranging a sale of the company or 
    2. Orchestrating an ordered closedown of the business.
  • Liquidator – Being appointed as a liquidator either with an insolvent or solvent company. The primary duty is to realise the assets of the company and then distribute the proceeds minus the cost to creditors of the company. If your company is solvent, then a Members Voluntary Liquidation (MVL)  is used to repay shareholders of the company once all creditors repaid in full. If your company is insolvent? Then a Creditors Voluntary Liquidation (CVL) is used. 
  • Nominee and Supervisor – In the case of company voluntary agreements (CVAs), an insolvency practitioner assumes the nominee and the Supervisor’s dual role. They will first act as “nominees” and draft a workable proposal for the CVA. A Statement of Affairs (SOA) will be required to enable creditors of the company to be informed on how much they could expect to receive should the CVA be implemented. 

Once creditors have approved the CVA, the insolvency practitioner will become “supervisor” of the agreement and oversee matters throughout the CVA’s life. The Supervisor will monitor ongoing business performance to ensure the company remains on track to complete the CVA and move forward with a strong track record.

Insolvency practitioners also act in cases involving individuals:

  • Indvidual Voluntary Arrangement
  • Bankruptcy

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Qualifications a licenced insolvency practitioner require?

Insolvency practitioners usually have qualified in another capacity before qualifying as an IP. Many qualify as accountants, including:  

ACA. 

ACCA, or 

CIMA. 

However, you may directly qualify to bypass the above and prepare to pass the Joint Insolvency Examination Board Exams (JIEB).

Checking the credentials of an insolvency practitioner before signing up with them is vital. Beware, companies offer unqualified, unlicensed insolvency advice.

Usually, they refer your case on for a considerable fee as they are unable to act.

Qualified IPs have a certificate verifiable on the internet checking their regulating body.

Are insolvency practitioners regulated?

The Insolvency Act 1986, regulates Insolvency in the UK. Licensed Insolvency Practitioners remain subject to regular inspections by an inspector from their governing body. Within the UK, several recognised professional bodies act as regulators. They include,

  • Insolvency Practitioners Association (IPA)
  • Institute of Chartered Accountants in England & Wales (ICAEW)
  • Institute Chartered Accountants Scotland. (ICAS)

All operate similar standards and professionals required by qualified members licensed to act in the United Kingdom.

Licensed Insolvency Practitioner Fees?

Fees for employing an insolvency practitioner, fluctuate per case, and the amount of work and time is likely to be involved. However, for an uncomplicated Creditor Voluntary Liquidation, anticipate paying £4,000 and £850 for a basic Member Voluntary Liquidation.

CVAs and company administration involve additional time cost. Therefore, the fees are higher. 

CVAs involve an ongoing monthly supervisor’s fee, agreed when the company agrees yo pay creditors as built into the arrangement. Since these costs remain deducted from the amount available to creditors, they decide what proportion the insolvency practitioner will charge, for acting as Supervisor.

Usually, companies use corporate assets to finance the costs of the chosen insolvency proceedings, although in some cases, particularly for CVs, there are insufficient funds available to cover this. 

Directors may need to use personal funds, however.

When to approach a Licensed Insolvency Practitioner?

Deciding to appoint an insolvency practitioner remains a difficult decision for directors. However, many factors will affect the decision to act, as a company financial deteriorates and becomes unmanageable.

Approaching an IP, allows them to evaluate the options, and recommend the best course of action moving forward for your struggling business.

Early intervention allows the insolvency practitioner to protect the interest of creditors and safeguard the company. Allowing matters to falter merely reduces any chance of the business surviving and may expose directors to criticism and prosecution.

Early intervention offers more rescue and recovery options available to you, allowing the IP to negotiate informally with the company’s creditors, perhaps setting up a ‘Time to Pay‘ (TPP) arrangement with the HMRC and other creditors arranging a Company Voluntary Arrangement (CVA). Failing to act may lead to the shutdown of a business with a CVL.

Please contact HBG Advisory today on 0800 612 5448 for immediate advice.

Who Appoints an Insolvency Practitioner?

In the UK, Insolvency Practitioner can be appointed by:

  • The directors of a Limited Company;
  • Creditors of a company owed money;
  • Secretary of State;
  • The Courts, a Winding up Order:
  • The Secretary of State.

Searching for a licensed insolvency practitioner?

Accountants and Lawyers will recommend many directors the services of an insolvency practitioner they know. While professional introductions remain helpful, you should remain vigilant while ensuring the IP recommended is ‘licensed’ in the UK to act and able to take insolvency appointments legally. Failing, find a suitably licensed insolvency practitioner online. 

Please choose the one you trust and check their ability before committing.

The UK government provides a database of licensed insolvency practitioners qualified to act. Allowing you to examine an insolvency practitioner’s capabilities. 

If they are unqualified and do not have a license to take insolvency appointments, then halt proceedings until you can confirm their reputation as a firm.

Insolvency Practitioners fees?

IP’s remain required to act responsibly and remain transparent regarding fees.

Insolvency fees require creditor approval, and are charged on a time cost basis or fixed fee if determined by the companies creditors.

Read more in our article on creditors guide to insolvency fees.

We have a highly experienced insolvency practitioners team working in offices throughout England & Wales. HBG Advisory is part of one of the countries, the largest business recovery practices. We can demonstrate an emphatic approach to directors.

Conclusion

Insolvency practitioners remain regulated professionals within the United Kungdom. Thet have to operate within clear defined guidelines and regulations, and are policed by the regulatory bodies regulary. Dealing with insolvent companies issues requires technical knowledge along with a degree of commercial accumen. Therefore, when requiring professional advice, ensure you deal with a licensed IP and their team directly, avoiding at all time unqualified third party referrers. Insolvency Practitioners employed by HBG Advisory are all members of the Insolvency Practitioners association (and may be viewed on The Team at HBG Advisory). All cases are bonded with an insurance policy protecting monies and assets of the company. A statutory requirement on all cases from day one. The directors assure you of confidentiality at all times.

From day one, we provide a FREE initial meeting, helping you as directors understand the opportunities available in total confidence and without any commitment or cost.

The Team at HBG Advisory


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