What is A Licensed Insolvency Practitioner

What is a Licensed Insolvency Practitioner? Written by John A Waller, Consultant. Reviewed July 5th, 2024.

In the United Kingdom, an insolvency practitioner (IP) is a person who is licensed and authorised to act in a formal insolvency in connection with an insolvent person, partnership or company. As an IP, they support those in financial crisis by rescue and recovery in dealing with unmanageable corporate debt and individuals managing personal debt.

If your company suffers from financial difficulties, a meeting with an insolvency expert is wise to consider the best options available and, at the same time, protect the position of creditors and directors. If you are unsure or never met an insolvency practitioner before, you may be unsure what their duties and help they may offer once you have appointed them to help your company. As a director, it is vital to understand the responsibilities of an insolvency practitioner and appreciate what they can add to your business.

Licensed Insolvency Practitioner giving a helping hand.
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A Licensed Insolvency Practitioner.

A licensed insolvency practitioner (IP) is authorised to act on behalf of individuals and companies. They are usually, helping companies with financial issues.

An IP also helps directors of companies that remain solvent and wish to liquidate their company. This process is called a Members’ Voluntary Liquidation (MVL).

Usually, a director approaches an IP so that they may deal with their company’s financial problems caused by cash flow and creditor pressure.

What does a Insolvency Practitioner do?

IPs assist limited company directors in either rescuing or closing their companies. Insolvency requires the use of an insolvency practitioner legally, whose tasks include:

  • Realising company assets;
  • Dealing with creditor claims;
  • Distributing realised monies to creditors;
  • Investigating directors’ conduct;
  • Corporate insolvency.
  • Striking the company of the register at Companies House

A Licensed Insolvency Practitioner – A Liquidator?

An IP acts as a liquidator, along with other roles. Decided on the type of appointment:-

ADMINISTRATOR

An IP will be appointed as the company administrator in a company and pre-pack administration cases. They will work to achieve a better outcome for creditors, whether by arranging a company sale or facilitating an ordered business shutdown.

LIQUIDATOR

They act as liquidators in both solvent and insolvent company liquidations. The insolvency practitioner’s role remains to realise company assets and ensure appropriate distribution to creditors. In insolvent liquidations, like Creditors’ Voluntary Liquidation (CVLs), creditors typically consist of suppliers, banks, and other lenders. In an MVL, which is the liquidation of a solvent company, the directors and shareholders remain in line to receive the proceeds.

NOMINEE AND SUPERVISOR

In Company Voluntary Arrangements (CVAs), an insolvency practitioner will take on the dual roles of nominee and supervisor. They will first act as a ‘nominee’ and remain responsible for creating a viable proposal for the CVA. Directors present a Statement of Affairs (SOA), which will be produced, and creditors will be informed how much they can expect to receive once the CVA is approved. Then, the insolvency practitioner will become the “supervisor” of the agreement and oversee matters throughout the CVA. The business’s ongoing performance remains monitored to ensure that the company keeps on track to complete the CVA and emerge with an excellent chance of enjoying a successful future.

Insolvency Practitioners – Regulated?

The Insolvency Act 1986 regulates UK insolvency. Several recognised professional bodies, including ICAEW, IPA, and ICAS, adopt the same strict guidelines allowing IPs to operate.

When Should I Contact A Licensed Insolvency Practitioner?

For many companies, an IP is appointed when distress levels reach an unmanageable point and directors can no longer continue with the current situation. At this stage, an insolvency practitioner will step in, assess the options, and recommend the best course of action.

An insolvency practitioner remains more valuable to your company the earlier you seek their advice. By contacting HBG ADVISORY during the initial stages of distress, you will give your company the greatest chance of survival. More extensive rescue and recovery options will be available, including negotiating with creditors informally through a Time to Pay (TTP) or formally by a Company Voluntary Arrangement. If left too late, the only realistic option is often a complete shutdown in a CVL.

Who appoints an insolvency practitioner?

Appointed by:-

  • a creditor of the company, 
  • Appointed by the courts, 
  • Or directors of a financially distressed company. 

Whoever initiates an insolvency procedure remains liable for paying the fees. 

However, if a creditor initiates any insolvency proceedings against a company, the director receives a Winding Up Petition initiating the process of the company enforcing compulsory liquidation.

Usually, however, the director who approaches an insolvency practitioner first favours control of the procedure rather than having a practitioner appointed to the company by creditors through compulsory liquidation. IPs always work with creditors, whether appointed by the directors or not.

IPs initially offer directors guidance but will always protect creditors’ interests.

Insolvency practitioner cost?

Costs fluctuate depending on the procedure adopted. However, expect to pay around £3,000 for a CVL. Costs are recovered by liquidating the company’s assets. When proceeds from the sale of assets are deficient, directors remain accountable for paying fees. 

Subject to the age of the trading business and how directors remunerated themselves, directors may claim redundancy once the business is liquidated.

CVAs have a monthly supervisor’s fee that lasts the duration of the CVA. The fee is part of the approved monthly contribution amount. The insolvency practitioner takes the amount, reducing the balance remaining for the company creditors. The creditors then agree to the supervisor’s fees.

Qualifications of an IP?

To practice as an IP. Exams set by the Joint Insolvency Examination Board (JIEB). Once passed, experience counts on dealing with complex issues and how commercial companies are saved. Licences remain issued by various professional bodies, and the history of the IP@s can be sought online for fines and any disciplinary action.

Picking Licensed Insolvency Practitioners?

Suppose you are contemplating liquidating your limited company or seeking insolvency consultation. Then, only approach a firm of licensed insolvency practitioners. 

In the UK. Many trades as an insolvency specialist, though neither qualified nor insured.

So, check the qualifications before asking for help.

Verification, however, remains superficial. View the Insolvency Service Website.

To view our IPs, check out the team at HBG Advisory.

Finding an Independent IP?

Often, Accountants recommend IPs. However, call many and feel comfortable with them!

  • Ensure you note everything down in writing.
  • Ask how much.
  • If you have an overdrawn directors loan, understand your position.
  • Ask to speak to previous clients.
  • Has the IP’s a disciplinary track record?
  • REMEMBER. TRUST REMAINS IMPORTANT. 
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