We explain what an insolvency practitioner is in the UK, and their role in helping distressed companies.
Below, we’ll cover their qualifications, how they’re regulated, who appoints them and how they’re paid.
Insolvency Practitioner: Definition
Insolvency practitioners, also known as IP’s, are individuals authorised to act in relation to an insolvent individual, partnership or limited company.
Licensed insolvency practitioners are often either chartered accountants, or solicitors working within an accountancy or law firm.
In addition to passing specific exams they must be licensed by an authorising body to carry out formal insolvency procedures.
Qualifying as an Insolvency Practitioner
Insolvency practitioners study hard for many years to obtain the necessary licence to take insolvency appointments. In order to qualify to offer an insolvency service they must pass the JIEB Exams which happen every November.
Prior to taking the Joint Insolvency Examination Board (JIEB) exams, potential IP’s must first register with one of the professional bodies, such as the ICAEW.
Even after passing, insolvency practitioners in the UK are subject to regular inspection by the relevant professional body usually by a ‘spot check’.
Duties of an IP
Although their role differs slightly depending on the particular type of procedure, an IP’s basic duties are to realise company assets to the best of his/her capabilities for the benefit of creditors.
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.
A licensed insolvency practitioner can manage any of the following formal procedures within their appropriate roles:
- Winding up Petitions
- Company Voluntary arrangements
- Creditors’ Voluntary Liquidation
- Individual Voluntary Arrangements
- Members’ Voluntary Liquidation
Insolvency Practitioner Code of Ethics
A clearly defined code of ethics for insolvency practititioners is laid out here: https://www.gov.uk/government/publications/insolvency-practitioner-code-of-ethics
Fees of an Insolvency Practitioner in the UK
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.
Duty of Care
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.
The money to pay the IP’s comes from the money which is collected to pay creditors as part of the insolvency process. All of their fees have to be signed off on by creditors, after providing an estimate at the beginning of the procedure.
How Insolvency Practitioners are Authorised and Regulated
It’s the Secretary of State’s responsibility to oversee the whole insolvency industry in the UK.
Under the Insolvency Act 1986, the principle law governing insolvency services, certain recognised professional bodies are authorised to licence their members as IP’s.
The Insolvency Act 1986 recognises:
- Insolvency Practitioners Association:
- BIS Insolvency Service
- Institute of Chartered Accountants of England and Wales
- Institute of Chartered Accountants in Scotland
- Institute of Chartered Accountants in Ireland
- Association of Chartered Certified Accountants
- Law Society of England and Wales
- Law Society of Scotland
- Law Society of Northern Ireland
Choosing a Suitable Insolvency Practitioner
Below is a list of traits to try and avoid when selecting an insolvency practitioner for your company:
- Payment of upfront fees without commencing work.
- Poor choice of professional agents, including valuers.
- Lack of responsiveness from the advisor once they have been paid.
- The advisor lacks the knowledge in relation to Redundancy and/or interactions with the Redundancy Payments Office.
- Lack of understanding in advising the directors’ on the full range of options available to the company e.g. Creditors’ Voluntary Liquidation, Company Voluntary Arrangements or Administration.
- Creditors are still phoning as the insolvency advisor has not dealt promptly with the aggressive creditors’ enquiries.
- We are part of an insolvency practice with regulated and Licensed Insolvency Practitioners, so you can be assured of the professional advice at all times.
- We deal with a large number of insolvencies across the UK and our team have many years’ experience.
Acting as a Liquidator
A company liquidator refers to an appointed licensed insolvency practitioner. It is their role 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).
A large percentage of directors assume that they need an insolvency practitioner or company liquidator straight away and this may not be the case. Depending on your situation it may be best to address several other aspects of the situation before engaging someone in this role.
Do You Need Immediate, Confidential Help?
Whether you are looking for insolvency practitioners in London, Birmingham, Manchester or elsewhere within the UK, you can speak with one of the team today about your company’s insolvency problems by calling us on 08000 746 757. Alternatively, use our live support feature at the top of the page to get answers fast.