Insolvency practitioners are licensed professionals who are authorised to act on behalf of individuals, partnerships or companies that are insolvent.

They are highly experienced and have undergone rigorous training. They are also tightly regulated and their in-depth knowledge is second to none. If your business is struggling to meet its debts, an insolvency practitioner should be your first port of call.  

The Role of an Insolvency Practitioner

An insolvency practitioner is described as a “competent authority” under the Insolvency Act of 1986, and they are also experts in both finance and the law, in addition to insolvency. To reach this level, they will have passed extremely challenging examinations and combined this with practical experience of working on insolvency cases. In the UK, only a licensed insolvency practitioner can be appointed to work on formal insolvency cases.

They are not just specialists in liquidating companies, they can also perform company rescues, on occasion, and their early involvement is the best way to facilitate the survival of a  troubled firm. In the course of this, they will have responsibility for handling assets and funds, securing deals and ensuring all parties are kept informed.

What Qualifications Does an Insolvency Practitioner Have?

An Insolvency Practitioner is licensed and authorised to act for insolvent individuals, partnerships or companies. They will often have qualified first in accountancy, although this is not essential,  and then taken additional examinations to become specialists in insolvency.

It is compulsory to pass examinations as set by the Joint Insolvency Examinations Board to become an Insolvency Practitioner. These consist of two papers, of three and a half hours each, and which cover corporate and personal insolvency. These have both financial and legal questions but also require the candidate to demonstrate knowledge of the real world of insolvency. In order to be eligible to sit the examinations, the candidate needs to have undertaken at least 600 hours of work within an authorised insolvency practice over the past three years. 

While the pass rate can vary year on year, plenty of candidates are required to resit. What is more, both papers need to be passed for a full qualification to be awarded – if  only one is passed, then the individual can only apply for a partial licence 

It is worth bearing in mind that the average age for sitting the JIEB exams is 33 and so an insolvency practitioner will have gained both work experience and no doubt shown high levels of commitment in order to undertake the extensive study burden. It is not unusual for the process to take as long as 10 years. Once the exams are passed, the individual needs to be licenced with an approved professional body.

Insolvency Practitioners Must Register with a Professional Body

Candidates who pass the JIEB exams are then required to register with a recognised professional body. These are the Institute of Chartered Accountants in England and Wales (ICAEW), the Association of Chartered Certified Accountants (ACCA), the Insolvency Practitioners Association (IPA), the Institute of Chartered Accountants Scotland (ICAS) and Chartered Accountants Ireland (CAI). Meanwhile the Insolvency Service, which is a government agency, has an overarching role and regulates the professional bodies, ensuring they are fit for purpose.

An Insolvency Practitioner is a “Fit and Proper Person’

This is a legal concept and it relates to an individual having high levels of trustworthiness. An insolvency practitioner will hold a ‘bond’ which is used as security to ensure there is proper performance and is issued by an insurer. It is there to protect against any losses caused by fraud or dishonesty and if this were to occur then, a claim may be made against it.

Clearly, when handling potentially last sums of money following the realisation of assets, an insolvency practitioner’s work must be transparent and scrupulous. They will hold detailed records on their cases and this will show the progress of cases, with regular updates provided to the bond issuer,  known as the cover schedule. They will also ensure that creditors are kept informed. In addition, an insolvency practitioner will also have professional indemnity insurance. 

What can an Insolvency Practitioner Help With?

An insolvency practitioner can be called on when directors have concerns about solvency. So,  this could be when they cannot pay bills, are being chased by creditors and they are unable to find a solution themselves.

Because of the extent of their knowledge, the insolvency practitioner should be able to gain insight into a situation – provided they are given full details – relatively quickly. This will allow them to advise the directors on what next steps should be. A key benefit of asking for guidance from an insolvency practitioner is to attempt to prevent a business being compulsorily wound up in the courts.

Even if a business is to cease trading, avoiding actions through the court should allow a better outcome for directors and ensure they have more control. In some cases, the way forward may be liquidation such as via a Creditors’ Voluntary Liquidation or a Members’ Voluntary Liquidation or they may recommend a business is put into administration if a rescue is deemed possible.

The insolvency practitioner will also have specialist understanding of how to deal with HMRC and directors should be aware that unpaid tax liabilities can be one of the most serious problems affecting a business. However, a successful negotiated Time to Pay arrangement with HMRC may allow some valuable breathing space in which the company could recover. Furthermore, it may be possible to reach arrangements with creditors via paying them in instalments should the business have sufficient funds coming through in the future.

How do I Find an Insolvency Practitioner?

An insolvency practitioner could be found as a result of recommendation or through your own searches, but make sure any professional is properly qualified and registered via the government website. It may also make sense to engage a firm that employs a number of insolvency practitioners as this can bring benefits in terms of sharing knowledge and gaining awareness of many different sectors.

Relationships are also important – you will be working closely with the Insolvency Practitioner and if you find them approachable and understanding, then this can only help the process.

When Should I Contract an Insolvency Practitioner?

If your business is experiencing severe financial difficulties, such as if debts are mounting up, creditors are chasing for payment and you fear that the firm could go under, then don’t delay. Speaking to an insolvency practitioner early is your best defence.