If your company is in financial distress, you might be exploring whether to bring in an insolvency practitioner.

As with all professional services, not all Insolvency Practitioners are the same. It’s always important to check the level of experience of any IP you decide to instruct and their experience with businesses of your type and size.

Professional services are never cheap and price should not be your primary consideration, but costs are a relevant factor and some insolvency practitioners tend to specialise in big company insolvency whereas others work with smaller companies. Personal relationships, trust and empathy are always vital as well.

Whilst most of the work of an Insolvency Practitioner is when he or she is instructed as liquidator, administrator or receiver and the role is independent of directors and the IP must act independently and in accordance with duties, an IP can alternatively be instructed to represent the interests of directors or others who need to protect their legal interests in dealing with the IP instructed on the liquidation, administration or receivership.

Our Insolvency Practitioners are all highly experienced and fully licensed. We are generally instructed and specialise in working with smaller businesses and company directors. Please do contact us to find out about us and decide whether we are the right choice for you.

What are the role and duties of an Insolvency Practitioner?

An Insolvency practitioner (IP) is an individual authorised to act in relation to an insolvent individual, partnership or limited company as laid out in the Insolvency Act 1986.

Licensed insolvency practitioners in the UK  often have a previous background as chartered accountants or lawyers.

They must have:

  • passed the JIEB insolvency examinations
  • gained relevant experience in insolvency work
  • demonstrated to a regulator (an authorising organisation) that they are fit and proper to work as an insolvency professional

Code of Ethics

A clearly defined code of ethics for insolvency practititioners is laid out here: https://www.insolvencydirect.bis.gov.uk/freedomofinformationtechnical/technicalmanual/Ch49-60/Chapter%2055/part3/part_3.htm

Briefly, IP’s are expected to demonstrate:

  • integrity
  • objectivity
  • professional competence and due care
  • confidentiality
  • professional behaviour

See also our page here.

Is an Insolvency Practitioner the Same as a Liquidator?

A company liquidator refers to an appointed licensed insolvency practitioner who is overseeing the liquidation process.

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).

In practice, an insolvency practitioner will have an official title depending on the insolvency procedure in question: they may be a liquidator, administrator, nominee, supervisor, or trustee in bankruptcy.

What powers do Insolvency Practitioners have?

Although their role differs slightly depending on the particular type of procedure, an insolvency practitioner’s first goal is to protect the interests of creditors. Their basic duties are to realise company assets for the benefit of creditors and supervise the winding down of the company.

The role typically involve a number of tasks, including dealing with the insolvent company’s creditors or, in the case of a business rescue procedure such as administration, offering advice as to how the company may avoid liquidation altogether.

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.

They also work with employees, assisting them through redundancy, helping them submit payment arrears and offering advice.

A licensed insolvency practitioner can manage any of the following formal procedures within their appropriate roles:

Are Insolvency Practitioners Regulated?

Yes, but the way IP’s are regulated is quite complex and regulation, in terms of ethics is via a variety of different bodies. In legal terms, Insolvency Practitioners must act in accordance with the Insolvency Act 1986 and case law.

In summary, Insolvency Practitioners have quite wide ranging powers and challenging the actions of an Insolvency Practitioner is not easy, is expensive and risky.

How Much Do Insolvency Practitioners Cost?

IP’s 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.

A typical cost for the liquidation of a small business would be between £4000-7000 + VAT.

When Should I Contact an Insolvency Practitioner?

Most directors will contact an insolvency practitioner when they feel that the business has reached a state of finacial difficulty that warrants professional advice.

Consulting an insolvency practitioner doesn’t necessarily mean that the business must be shut down, but it’s a chance to receive expert advice on what options are available for dealing with serious debt. These may include shutting the company down via a voluntary liquidation process, or they might mean attempting to rescue the company via finance, or a structured repayment plan with creditors known as a Company Voluntary Arrangement.