What is an insolvency practitioner?

What is the role of an insolvency practitioner?

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.

How and when do I appoint an insolvency practitioner?

You can seek assistance from an insolvency practitioner for advice without having to enter into an official insolvency process. You may decide to do this if your company hasn’t yet reached the point of insolvency but you’re worried about a serious financial decline, for example.

Alternatively, you may be aware that your company is already insolvent and wish to appoint a licensed insolvency practitioner to commence formal insolvency arrangements such as placing the company into administration or liquidation. 

The earlier you take action once you become aware your company is insolvent - or is likely to soon become insolvent - the better. The sooner you contact a licensed insolvency practitioner, the more options will be open to you and your company.

How can I find a local insolvency practitioner?

Given the large number of unregulated insolvency ‘experts’ advertising their services online, finding a local insolvency practitioner you can trust is essential. It’s very easy to be misled by people who claim to be insolvency advisers, but who simply refer you on to a licensed IP after charging for their services.

This results in paying twice for crucial insolvency advice, and delaying the guidance you desperately need – information that could help you avoid misconduct allegations as a director, and ensure you meet your legal obligations to creditors. 

Finding an insolvency practitioner who operates nearby is extremely helpful as it means you can meet them in person rather than communicating solely by phone or online. You also benefit from their local knowledge in your sector, and their experience of issues that might be specific to your region. So how can you find a reliable insolvency practitioner who is licensed, and who operates locally?

If you carry out an online search for ‘licensed insolvency practitioner’ plus your town or area, it will deliver the results you’re looking for. You can then make a shortlist and contact each IP or firm individually. Most reputable insolvency practitioners offer free initial consultations during which you can find out whether they understand your needs, and gain confidence that they’ll be able to help you.

Your local Chamber of Commerce may also be able to recommend a local insolvency practitioner based on their reputation and experience. In addition, your accountant or solicitor is likely to have connections with licensed IPs in the area.

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.