Insolvency Practitioners
Insolvency practitioners are professionals specialising in the field of insolvency who help individuals and businesses navigate debt, restructuring and company closure.
The role of insolvency practitioners is crucial in the insolvency process, as they protect the interests of creditors and other stakeholders and help ensure that the insolvency process is carried out fairly and efficiently.
Insolvency practitioners are often accountants or solicitors working within an accountancy or law firm. As of 2022, there are approximately 1600 licensed insolvency practitioners in the UK[1]Trusted Source – R3 – The role and value of Insolvency Practitioners in the UK.
In this article, we will take a closer look at the role of insolvency practitioners, including their qualifications, duties, responsibilities, and the different types of insolvency they handle. We will also provide guidance on how to choose an insolvency practitioner.
- What Qualifications Does an Insolvency Practitioner Have?
- What are the Duties and Responsibilities of an Insolvency Practitioner’s Role?
- Types of Insolvency
- What Powers do Insolvency Practitioners Have?
- How to Choose an Insolvency Practitioner?
- How Much Does an Insolvency Practitioner Cost?
- Are Insolvency Practitioners Regulated?
- Is an Insolvency Practitioner the same as a Liquidator?
- Insolvency Practitioner FAQs
What Qualifications Does an Insolvency Practitioner Have?
To become an insolvency practitioner, specific qualifications and certifications must be met. In the UK, practitioners must be authorised by the Insolvency Practitioners Association (IPA) or another recognised regulatory body.
To become authorised, candidates must meet the following requirements:
- Hold a recognised professional qualification in insolvency or related fields ( JIEB Exams)
- Have a minimum of two years of experience working in the insolvency industry
- Pass a fit and proper test to ensure they have the right skills and experience
- Adhere to a code of ethics and professional conduct.
In addition to the IPA, other professional bodies offer certifications for insolvency practitioners, such as the Institute of Chartered Accountants in England and Wales (ICAEW).
A recognised qualification or certification is essential as it demonstrates a practitioner’s expertise and commitment to the industry and assures clients that they will receive high-quality services.
Even after passing, insolvency practitioners in the UK are subject to regular inspection by the relevant professional body, usually by a ‘spot check’.
What are the Duties and Responsibilities of an Insolvency Practitioner’s Role?
The duties and responsibilities of insolvency practitioners are varied and require various skills, including financial expertise, legal knowledge, and excellent communication and negotiation skills. Some of the essential duties and responsibilities of insolvency practitioners include the following:
- Managing the insolvency process: This involves overseeing the entire insolvency process, including appointing administrators, liquidators, or receivers and ensuring that all the necessary steps are taken to bring the insolvency to a conclusion.
- Protecting the interests of creditors: Insolvency practitioners must act in the best interests of creditors and ensure that all debts are paid fairly and transparently.
- Advising debtors: Insolvency practitioners must provide advice and support to debtors and help them understand their options for resolving their financial difficulties.
- Negotiating with creditors: Insolvency practitioners may be required to deal with creditors on the debtor’s behalf to reach a mutually acceptable agreement.
- Ensuring compliance with legal requirements: Insolvency practitioners must meet all the legal requirements associated with insolvency, including filing reports and submitting accounts to the relevant authorities.
- Investigations – Much of their role is investigative, too, as the IP has a legal duty to examine the activities of the company directors to check for the possibility of wrongful or fraudulent activity.
- Managing assets: In some cases, insolvency practitioners may be required to manage the debtor’s assets and ensure that they are sold to maximise the return to creditors.
Overall, the role of insolvency practitioners is to help individuals and businesses navigate the complex and often stressful process of insolvency and ensure that all stakeholders’ interests are protected.
Types of Insolvency
Insolvency can take many forms, and the type of insolvency relevant to a particular case will depend on the individual or business circumstances. Some of the most common types of insolvency include:
- Personal insolvency: This refers to the financial difficulties of an individual, such as bankruptcy or an individual voluntary arrangement (IVA).
- Corporate insolvency: This refers to the financial difficulties of a company and may involve the appointment of an administrator, liquidator, or receiver to manage the process.
- Creditor’s voluntary liquidation (CVL): This is a process where a company is liquidated voluntarily by its directors or shareholders, usually because it cannot pay its debts.
- Compulsory liquidation: This is a process where a company is liquidated by court order because it cannot pay its debts.
- Administration: This is a process where an administrator is appointed to manage the affairs of a company in financial difficulty and to try to rescue it as a going concern.
- Receiver: A receiver is appointed by a lender to manage and sell a borrower’s assets in default.
Each type of insolvency has its own set of rules and procedures, and insolvency practitioners must thoroughly understand these to manage the process effectively. Understanding the different types of insolvency is vital as it allows individuals and businesses to make informed decisions about the best course of action in the event of financial difficulty.
What Powers do Insolvency Practitioners Have?
Insolvency practitioners have wide-ranging powers granted under the Insolvency Act 1986 and the Insolvency Rules 2016. These include:
- sell assets
- pay creditors
- dismiss staff
- searching company files and bank records
- call witnesses to trace assets of the company
- negotiating the sale of the company
- proposing restructuring proposals or a CVA
How to Choose an Insolvency Practitioner?
Choosing an insolvency practitioner is an important decision and requires careful consideration. The following are some key factors to keep in mind when selecting an insolvency practitioner:
- Qualifications and experience: Make sure the practitioner you choose has the necessary qualifications and experience to handle your case. Look for a practitioner authorised by a recognised regulatory body with a proven track record of managing similar cases.
- Reputation: Research the practitioner’s reputation and ask for references from previous clients. Read online reviews and check for any complaints or disciplinary action against the practitioner.
- Communication skills: Insolvency can be a complex and stressful process, so it’s crucial to choose a practitioner who can communicate effectively and provide clear, concise advice.
- Fees: Consider the practitioner’s prices and ensure they are transparent and reasonable. Don’t be afraid to ask for a breakdown of the prices and any additional costs that may be involved.
- Approach: Practitioners may have different approaches to insolvency, so make sure you choose someone whose approach aligns with your own. For example, if you’re looking for a practitioner who will take a more aggressive approach to debt collection, look for someone with a track record of doing so.
- Availability: Make sure the practitioner you choose is available to meet with you and is responsive to your needs. Consider whether they can provide the support and guidance you require throughout the process.
- Personal fit: Insolvency practitioners often deal with sensitive and private issues, so choosing someone you feel comfortable working with is essential. Consider whether you feel confident in their abilities and whether they are approachable and understanding.
How Much Does an Insolvency Practitioner Cost?
IPs are paid either as a fixed fee, on an hourly rate, or as a percentage of the money raised to pay creditors what they are owed. In a typical small business liquidation, the cost will be between £4000-£7000.
The money to pay the IPs comes from the funds collected to pay creditors as part of the insolvency process. All of their fees must be signed off by creditors after providing an estimate at the beginning of the procedure.
As per SIP 9 (Statement of Insolvency Practice), they have a statutory duty to be fair and transparent in their work as part of their code of ethics.
Are Insolvency Practitioners Regulated?
Under the Insolvency Act 1986, the principal law governing insolvency services, certain regulatory bodies are recognised to licence their members as IPs.
Is an Insolvency Practitioner the same as a Liquidator?
A company liquidator is simply a licensed insolvency practitioner: their role is to oversee the liquidation of a company from start to finish. A liquidator can either be appointed by the shareholders or directors of a company (as in the case of a voluntary liquidation) or by the court (in the case of a compulsory winding up of a company).
Many directors assume that they need an insolvency practitioner or company liquidator immediately, which may not be the case. Depending on your situation, it may be best to address several other aspects before engaging an insolvency practitioner as the company’s liquidator.
Insolvency Practitioner FAQs
In a bankruptcy case, the insolvency practitioner is responsible for managing the administration of the individual’s assets and liabilities and communicating with creditors. They may also be involved in negotiating with creditors to reach a settlement or resolution.
In some cases, an insolvency practitioner may be able to help an individual avoid bankruptcy by exploring alternative options, such as an individual voluntary arrangement or a debt management plan. However, the best course of action will depend on the individual’s specific circumstances.
In some cases, an insolvency practitioner may be able to help an individual avoid bankruptcy by exploring alternative options, such as an individual voluntary arrangement or a debt management plan. However, the best course of action will depend on the individual’s specific circumstances.
If you are unhappy with the service provided by an insolvency practitioner, you can make a complaint to the practitioner or their professional body. Here’s how:
- Contact the practitioner directly: Start by contacting the practitioner and explaining your concerns. They may be able to resolve the issue to your satisfaction.
- Lodge a complaint with the practitioner’s professional body: If the practitioner is a member of a professional body, such as the Insolvency Practitioners Association (IPA) or the Association of Chartered Certified Accountants (ACCA), you can make a complaint to the body. They will have a complaints procedure that you can follow.
- Raise the issue with the relevant regulatory body: If the practitioner is authorized by a regulatory body, such as the Insolvency Service, you can raise the issue with the body. They will investigate the complaint and take appropriate action.
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.
- Trusted Source – R3 – The role and value of Insolvency Practitioners in the UK
