What is an Insolvency Practitioner

What is an insolvency practitioner? Written by John A Waller, Consultant. Reviewed June 5th,2024.

What is an Insolvency Practitioner?

A licensed insolvency practitioner (IP) has many duties for financially struggling companies.

Usually, an insolvency practitioner can provide company directors with expert advice in pre-insolvency circumstances to attempt and rescue a business and keep it on track. However, where a company is insolvent, an IP may take office to take full responsibility for the company before closing it. 

A Licensed Insolvency Practitioner (IP)(Licensed IP) is authorised to carry out formal insolvency procedures for company directors, companies and individuals who remain insolvent.

An IP must hold a licence and have:

  • passed the licensed insolvency examination board jieb exams;
  • gained experience in insolvency work and
  • satisfied an authorising organisation that they are fit and proper to act as an IP.

As an IP, they provide a wide range of insolvency services associated with business recovery and rescue, usually due to company debt.

They deal with corporate Insolvency, including corporate recovery, rescue, and personal.

An IP works with directors during financial trouble. They look at all the options available to company directors, including rescue options. So, if you conclude you need insolvency advice, many different options exist depending on whether the company has a future.

However, other professionals can act as company liquidators, not IPs, if the court winds up a company following a petition by a creditor in compulsory liquidation. The court will appoint an official receiver to liquidate the company. Suppose the official receiver believes the skills and resources of a private IP are required. In that case, they can appoint one to act as the liquidator. If a company is wound up, the Official Receiver (or licensed insolvency practitioner) will be a liquidator for the Secretary of State. If the company’s creditors believe that appointing the IP as the liquidator will better protect their interests, they can vote to do so.

Insolvency processes used in England and Wales for limited companies include:-

and then for individuals (personal Insolvency):- 

What, then, does an insolvency practitioner do?

IPs carry out formal insolvency process and manage restructuring options, such as 

  • Company liquidator in shut-down company liquidation cases; 
  • nominees and supervisors in CVAs; 
  • as administrators;
  • Administrative Receiver.

Licensed Insolvency Practitioners:- 

  • Offer advice and guidance to directors and stakeholders of insolvent or otherwise financially distressed companies, and once appointed:
  • Negotiate with creditors, arrange valuation and disposal of assets, and ensure outstanding company matters remain dealt with per the Insolvency Act 1986:
  • HMRC Time to Pay.

However, IPs assist with the closure of solvent companies, ensuring cost-effective cash extraction from profitable businesses—the process known as a Members’ Voluntary Liquidation (MVL).

Who then appoints an insolvency practitioner?

A licensed IP can be appointed by:-

  • A creditor of the company;
  • appointed by the courts; 
  • directors of a financially distressed company. 

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

However, if a creditor initiates any insolvency proceedings against a company, the director receives a Winding Up Petition starting the company’s compulsory liquidation.

Usually, the director approaches an IP first, favouring control of the procedure rather than having a practitioner appointed to the company by creditors through compulsory liquidation. (Ips always work with creditors, no matter if the director appoints).

IPs offer guidance to company directors but will always ensure that creditors’ interests stay protected.

Does Insolvency Practitioners Service Cost?

Costs, therefore, fluctuate depending on the procedure adopted. However, expect to pay around £4,000 for a CVL. Costs recovered by liquidating the company assets. However, in cases where proceeds from the sale of assets remain deficient. Then, directors, therefore, remain accountable for paying fees. 

The subject is more about the age of trading businesses and how directors remunerated themselves. Then, use a redundancy claim once the business is liquidated.

Company Voluntary Arrangements have a monthly supervisor’s fee for the duration of the CVA. The cost is part of the approved monthly contribution amount. The IP takes the amount, reducing the balance remaining for the company’s creditors. The creditors then agree to the supervisor’s fees.

Qualifications of an insolvency practitioner?

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

The Insolvency Practitioners Association regulates our Insolvency Practitioners.

Our directors remain members of R3, while our practice is part of the Turnaround Management Association.

Insolvency practitioners – Are they regulated?

Corporate Insolvency remains a highly regulated industry. A regulatory board supervises every individual licensed IP. Numerous professional bodies regulate insolvency practitioners; recognised professional bodies include: 

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

The governing body’s conduct and compliance with individual practitioners. If they consider the individual not fit and proper to continue in practice, they will consider revoking the licence and even issuing fines.

Are you picking an insolvency practitioner?

Let’s say you’re considering liquidating your limited company or seeking insolvency advice. Then, only approach a firm of licensed insolvency practitioners. 

In the UK. Many operate as insolvency specialists, though neither qualified nor insured.

We list the points you should consider when considering your choice of IP.

  • Request upfront fees;
  • Poor choice of professional agents, including valuers;
  • The poor response once paid;
  • Often, the initial advisor has limited knowledge of redundancy;
  • Limited understanding of helping the directors on options available;
  • Creditors are not being dealt with correctly.

So then, why choose HBG Advisory:-

  • Our IPs remain regulated and licensed insolvency practitioners in the UK, and we are affiliated with the Insolvency Practitioners Association.
  • We have many years of experience assisting directors and companies across the UK.

Check the qualifications before asking for help.

Extreme care is required when choosing the correct insolvency practitioner.

Verification, then, is simple. View the Insolvency Service Website.

Why use an Insolvency Practitioner?

IPs in the UK provide licensed help to company directors by helping rescue businesses and overseeing the orderly winding down of insolvent companies. This allows money to be paid to creditors in the event of Insolvency.

Common instances for seeking their help is when your business:

  • Can’t pay VAT! What happens next?
  • Can’t pay employees anymore.
  • My business can’t pay its creditors.
  • You can’t pay back your Bounce Back loan.
  • My business can’t survive the pandemic.
  • Are PAYE Arrears Pulling Your Business Down?

Then, Meet the Team

To view our IPs, check out The Team at HBG Advisory.

Finding an Independent IP?

Often, Accountants recommend IPs. Take care. 

  • Ensure you note everything you are told.
  • Ask how much. (Free insolvency advice for companies)
  • If you have an overdrawn directors loan, understand your position.
  • Ask to speak to previous clients.
  • Has the IP’s a disciplinary track record?
  • Explore all closure options.

Our team is always willing to provide advice. All matters relating to formal Insolvency remain confidential. So ensure you let us know your problems, down to outstanding court claims. However, you may only review all debt solutions, ensuring you get the best business rescue advice.

During the Coronavirus COVID-19 pandemic (see how an Insolvency Practitioner helps in a pandemic), the UK government implemented various schemes to assist companies and ensure jobs were saved. For further help, view our website, which explains more in-depth.

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