Admitting your company is in financial difficulty is a brave decision. It is so easy to bury your head in the sand and hope your financial troubles either go away or magically right themselves. Unfortunately, business is not a fairytale, and the sooner you instruct an experienced Insolvency Practitioner (IP) to advise you and manage your company, the more likely your creditors will be paid. In addition, the early involvement of an IP can result in your business recovering and coming back in a stronger, more stable financial position than before it became insolvent.
What is an Insolvency Practitioner?
An IP is a person who is qualified and licensed to act on behalf of an insolvent person, partnership, or company. Typically, an accountant or solicitor, an IP must have passed their JIEB exams, have experience in managing insolvencies, and satisfy a Regulator (see below) that they are competent to carry out the role of IP.
What are Insolvency Practitioner Qualifications?
To carry out work under the Insolvency Act 1986, a person must pass the Joint Insolvency Examination Board (JIEB) exams. The exams comprise two papers, corporate insolvency and personal insolvency.
How are Insolvency Practitioners Regulated?
Under the Insolvency Act 1986, the Secretary of State is authorised to approve IP regulatory bodies for England, Wales, and Scotland (Northern Ireland has its own regime). At present, the following bodies can act as regulators:
- Institute of Chartered Accountants in England & Wales
- Association of Chartered Certified Accountants
- Insolvency Practitioners Association
- Law Society of England & Wales
- Law Society of Scotland
- Chartered Accountants Ireland
- Institute of Chartered Accountants of Scotland
In turn, the regulating bodies are themselves overseen by the Insolvency Practitioner Regulation Section (IPRS), which is part of the Insolvency Service.
The duties of the Insolvency Service are twofold:
- Direct Authorisation: Undertaken by the Insolvency Practitioner Section (IPS) to regulate those who apply directly to the Secretary of State for authorisation to act as an IP.
- Regulatory oversight, undertaken by the IPRS and involves:
- Overseeing the regulatory activities of the authorising bodies.
- Developing regulatory policy and professional standards.
- Guiding the insolvency profession on law and practice.
- Monitoring the effectiveness of the relevant legislation, including the Insolvency Act 1986.
How Do I Choose an Insolvency Practitioner?
In many cases, it will be you, as a company director, who approaches a licensed IP for help should your company become insolvent or fall into severe financial difficulties. You can find a licensed IP through the official UK Government website. It is essential to choose someone with whom you feel comfortable and who communicates everything in a way you can understand and implement. Being able to talk to your IP is important as together you may be able to work out a solution to save your business, either through a Company Voluntary Arrangement (CVA) or Administration (trading back to solvency). Also, it is important to look for someone who combines business acumen with compassion, as you may be forced to make difficult choices, such as making employees redundant.
What are the Core Duties of an Insolvency Practitioner?
An IP’s job can be divided into three main functions:
Advisory Responsibilities
Your IP will act as an advisor, explaining what may be done to save your business, whether restructuring and redundancies need to be carried out, and your duties as a company director, especially concerning creditors. They will also advise on how to avoid committing wrongful trading and how to communicate your financial situation to customers and suppliers.
Formal Insolvency Procedures
An IP must investigate what went wrong with your company and report their findings to creditors and the Insolvency Service. They must also look at options for saving the business and reducing job losses if possible. An IP is also required to take over the running of the company until a decision regarding the best way to move forward (e.g. a CVA, administration, or liquidation) is made.
Asset Realisation and Distribution
A crucial role of an IP is to ensure your company’s creditors, in order of priority, get back as much of the money they are owed as possible. This is normally achieved either through a CVA, where the company and creditors agree on a debt repayment schedule, or through selling company assets and distributing the proceeds to creditors. An IP is responsible for not only organising the selling of assets or proposing a CVA but also negotiating the terms of any sale/agreement.
How Can I Complain About an Insolvency Practitioner?
If you are unhappy with some aspect of an IP’s performance, the first step is to talk to them directly and outline your concerns. Confirm the conversation by email to create a correspondence trail.
Should you not receive the response you expected or remain unsatisfied with the job being done by the IP, you can use this government online form to complain to the IP’s authorising body.
You may feel apprehensive about complaining about the IP who is now in control of your company. If you are worried, you can contact an independent Insolvency Solicitor for advice and support.
Do I Need an Insolvency Practitioner for a CVA?
Yes, an IP is needed for all of the following business insolvencies:
- Creditors Voluntary Liquidation
- Members Voluntary Liquidation
- Compulsory Liquidation
- Administration
- Individual Voluntary Arrangement
- Company Voluntary Arrangement
- Bankruptcy
Getting Legal Advice
If you are worried or need advice on how to respond to a growing risk of insolvency or need support concerning an Insolvency Practitioner’s actions, please do not hesitate to reach out to us. As experts in insolvency law, we can provide advice and representation on all insolvency matters. Contact us on 0330 173 6983 or send us an email for more information.
