Duties of an Insolvency Practitioner

Duties of an Insolvency Practioner. Author: John A Waller, Reviewed June 24th, 2024.

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

 

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If your business encounters financial difficulties? Unless you have experience, you may consider appointing an insolvency practitioner or discussing your company’s issues to understand your ongoing situation. You may be unsure of their duties once you appoint someone to support you and your business. So, as a limited company director, you need to know the roles and responsibilities of an insolvency practitioner. They comprehend the value your business may offer, especially in the early stages of financial difficulties.

An Insolvency practitioner must be, therefore, appointed to write off company debt.

What are the duties of an insolvency practitioner, and what is an insolvency practitioner?

An insolvency practitioner (IP)– remains licensed to act on behalf of companies and individuals when facing Insolvency or acute financial distress. IPs help company directors of solvent companies that require a liquidation using a Members’ Voluntary Liquidation (MVL) to extract retained profits, including cash and assets.

A company director usually approaches an IP to help the company. 

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

Is a liquidator an insolvency practitioner?

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

Depending on the scenario, an insolvency practitioner may act as a liquidator.

As part of the duties of an insolvency practitioner they may act on behalf of a limited company 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 company’s assets and then distribute the proceeds minus the cost to the company’s creditors. If your company remains solvent, then a Members Voluntary Liquidation (MVL) is used to repay shareholders of the company once all creditors are repaid in full. If your company is insolvent? Then a Creditors Voluntary Liquidation (CVL) is used. 

  • Nominee and SupervisorIn the case of company voluntary agreements (CVAs), an insolvency practitioner assumes the nominee and Supervisor’s dual roles. They will first act as “nominees” and draft a workable proposal for the CVA. A Statement of Affairs (SOA) will be required to inform the company’s creditors of how much they could expect to receive should the CVA be implemented. 

Once creditors have approved the CVA, the insolvency practitioner will become the “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:

  • Individual Voluntary Arrangement (IVA)
  • Bankruptcy

HBG Advisory remain experienced in negotiating with HMRC on tax payment issues.

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Qualifications a licenced insolvency practitioner requires?

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).

It remains vital to check the credentials of an insolvency practitioner before signing up with them. Beware: Companies offer unqualified, unlicensed insolvency advice.

They usually refer to your case for a considerable fee, as they cannot act as the liquidator.

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,

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 costs. Therefore, the fees remain higher. 

CVAs involve an ongoing monthly supervisor’s fee, agreed upon when the company agrees to 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 CVAs, insufficient funds remain available to cover this. 

Directors may need to use personal funds.

When to approach a Licensed Insolvency Practitioner?

Deciding to appoint an insolvency practitioner remains difficult for company directors. However, many factors will affect the decision to act as a company’s finances deteriorate and become 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 interests of creditors and safeguard the company. Allowing matters to falter merely reduces any chance of the business surviving, and may expose company directors to criticism and prosecution.

Early intervention offers more rescue and recovery options, allowing the IP to negotiate informally with the company’s creditors, perhaps setting up a ‘Time to Pay‘ (TPP) arrangement with 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 at 0330 056 3120 for immediate advice.

Who Appoints an Insolvency Practitioner?

In the UK, the 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 to many company 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 can 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 unqualified and do not have a license to take insolvency appointments, halt proceedings until you can confirm their reputation as a firm.

Insolvency Practitioner’s fees?

IPs remain required to act responsibly and remain open regarding fees.

Insolvency fees require creditor approval and are charged on a time-cost basis, or the company’s creditors determine a fixed price.

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 the country’s largest business recovery practices. We can demonstrate an emphatic approach to directors.

Conclusion

Insolvency practitioners remain regulated professionals within the United Kingdom. They must operate within clearly defined guidelines and regulations, and are regularly policed by the regulatory bodies. Dealing with insolvent companies’ issues requires technical knowledge and commercial acumen. Therefore, when requiring professional advice, ensure you deal directly with a licensed IP and their team, avoiding total third-party referrers at all times. Insolvency Practitioners employed by HBG Advisory remain members of the Insolvency Practitioners Association (and may be viewed on The Team at HBG Advisory). All cases remain bonded with an insurance policy protecting the company’s monies and assets. 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 company directors understand the opportunities available in total confidence and without any commitment or cost.

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