What is an Insolvency Practitioner?
An insolvency practitioner (IP) is a licensed professional who is authorized to act on behalf of companies or individuals facing financial distress. IPs work to resolve their clients’ debt issues through various legal mechanisms, such as restructuring, liquidation, and bankruptcy.
As of 2022, there are approximately 1600 licensed insolvency practitioners in the UKTrusted 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 is an Insolvency Practitioner?
- What Qualifications Does an IP Have?
- What does an IP’s job involve?
- 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?
- How can I complain about an IP?
- When should I contact an insolvency practitioner?
What is an Insolvency Practitioner?
Insolvency practitioner (IP): A licensed professional who is authorized to act on behalf of companies or individuals facing financial distress, with the aim of resolving their debt issues through various legal mechanisms. These mechanisms can range from restructuring to liquidation, among others.
IPs play a multifaceted role in insolvency processes, encompassing both advisory and administrative functions. They are the linchpin in insolvency procedures such as Company Voluntary Arrangements (CVAs), Individual Voluntary Arrangements (IVAs), and bankruptcy proceedings.
Employing a unique blend of legal knowledge and financial acumen, insolvency practitioners:
- Evaluate the financial standing of the debtor and recommend the most suitable course of action.
- Liaise with creditors to negotiate settlements or repayment plans.
- Manage assets, including selling them off to repay creditors in the event of liquidation.
- Distribute funds to creditors in accordance with the chosen insolvency procedure.
- Ensure that the insolvency process is carried out in accordance with all applicable laws and regulations.
Insolvency practitioners can be a lifeline for companies and individuals in financial distress. They can help to assess options, develop a plan to resolve debt issues, and avoid the worst consequences of insolvency.
In short, an insolvency practitioner is a licensed professional who helps companies and individuals to resolve their debt issues.
What Qualifications Does an IP 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 does an IP’s job involve?
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.
What Powers do Insolvency Practitioners Have?
- 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.
How can I complain about an IP?
If you are unhappy with the service you have received from an insolvency practitioner (IP), you can complain to them directly. You should do this in writing, so that you have a record of your complaint.
If you are not satisfied with the IP’s response, or if they do not respond to your complaint within a reasonable amount of time, you can complain to the professional body that they are regulated by. In the UK, this is the Insolvency Practitioners Association (IPA).
You can also complain to the Insolvency Service, which is a government agency that regulates insolvency proceedings.
To complain to the IPA, you can visit their website or call them on 020 7676 3300.
To complain to the Insolvency Service, you can visit their website or call them on 0300 678 1001.
It is important to note that the IPA and the Insolvency Service cannot investigate complaints about commercial decisions made by IPs. They can only investigate complaints about unprofessional or improper conduct.
When should I contact an insolvency practitioner?
You should contact an insolvency practitioner if you are facing financial distress and are unable to meet your financial obligations. This could include if you are:
- Unable to pay your debts on time
- Being threatened with legal action by creditors
- In danger of losing your home or business
- Struggling to cope with your finances
Insolvency practitioners can help you to assess your options and develop a plan to resolve your debt issues. They can also advise you on the best course of action for your individual circumstances.
It is important to note that insolvency practitioners can only help if you are willing to be honest and open about your financial situation. They will need to see all of your financial information in order to give you the best advice.
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