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What is an insolvency practitioner?

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An insolvency practitioner, also known as an IP, is a professional licensed to help companies and individuals in financial difficulty. They may be appointed to administer formal insolvency processes, but crucially, can also be an invaluable source of support before full insolvency has been reached.

It’s important to seek assistance from ‘licensed’ insolvency practitioners, however, as they are regulated by an official body or association and have undergone extensive training.

Why is an insolvency practitioner’s role so important?

An insolvency practitioner’s role varies according to the circumstances, but if a limited company is in financial distress they can assess the business’ position and offer potential solutions.

Company directors have to take great care when their business is experiencing financial difficulty. Insolvency laws in the UK dictate that trading must stop as soon as the business becomes insolvent, or when directors believe that insolvency is inevitable.

Seeking help from a licensed IP in this situation is obligatory - failing to cease trade could be viewed as director misconduct, and there’s a danger that creditors could suffer further financial losses as a result.

Who are insolvency practitioners?

Licensed insolvency practitioners sometimes have a legal or financial background, and might work within an insolvency department for a company in these industries. Alternatively, an IP could work for a specialist insolvency firm.

As we mentioned, it’s important to ensure an IP is licensed before appointing them, as an individual or firm advertising insolvency services isn’t necessarily regulated or qualified to offer advice and practical assistance.

What does an insolvency practitioner do?

Professional advice and support

Seeking the professional advice of an insolvency practitioner offers huge benefits to companies in financial distress, and can help to prevent a further slide towards liquidation. It’s sometimes assumed that insolvency practitioners only become involved when a business is about to close down, but they can help companies recover through various measures.

With the UK’s supportive insolvency regime there may be a variety of options open to businesses in financial distress, and an IP’s principle objective is rescue and long-term recovery.

Official insolvency procedures

A licensed IP must be appointed to administer formal insolvency processes in the UK, including company administration, Company Voluntary Arrangements (CVAs), and company liquidation.

An insolvency practitioner realises business assets and distributes the proceeds of sale to creditors, but they’re also obliged to investigate the conduct of directors leading up to insolvency.

As well as assisting limited companies, a licensed IP helps individuals and sole trader businesses in a similar way, offering advice and practical support in relation to bankruptcy or debt remedy measures such as Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs).

Closure of solvent companies

IPs are also appointed to close down solvent companies. Sometimes a director may wish to retire, and if there’s nobody suitable to take over the business they might choose to enter a solvent liquidation process called Members’ Voluntary Liquidation (MVL).

Again, this is an official procedure even though the company is solvent, so a licensed IP oversees the process and ensures the company closes down according to statutory regulations.

Professional and ethical responsibilities

Insolvency practitioners must pass Joint Insolvency Examination Board (JIEB) exams, and gain broad practical experience before they can become licensed. They must also be approved and regulated by a professional body, which includes ongoing checks and inspections of their work.

For more information and help, please call our team of licensed insolvency practitioners at UK Liquidators. We can offer you a free same-day consultation, and operate from a network of offices around the country.

Jonathan Munnery
Partner

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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

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