What is an insolvency practitioner?
Often referred to as an IP. An Insolvency Practitioner is a professional person who is licensed to act on behalf of individuals and/or companies that are suffering financial distress or are facing insolvency. Typically, an individual or company director will approach an IP for their help in dealing with their personal or company financial affairs.
There are occasions when a company is solvent and the directors wish to liquidate by way of a Members Voluntary Liquidation, this is process is also conducted by an IP.
What’s the difference between an insolvency practitioner and a liquidator?
An insolvency practitioner acts in the role of a liquidator and this is one of a variety of roles that an IP will undertake when dealing with companies…
Liquidator – The role of the IP is to act for both insolvent and solvent companies and to realise company assets and distribute correctly to creditors. The distribution of assets depends on the type of liquidation. When it’s a Creditors Voluntary Liquidation which is abbreviated as a CVL. The creditors are normally suppliers, lenders, banks, HMRC. In the case of a Members Voluntary Liquidation or MVL it is usually the directors and shareholders who receive proceeds from the liquidation.
Administrator – If a company is failing financially or insolvent an IP will be appointed as the administrator of the company. The aim when appointing an insolvency practitioner as the administrator is to work towards an improved outcome for creditors. This could be via the sale of the company to suitable investors or a competitor or enabling an orderly shutdown of the company.
Nominee & Supervisor – This is only relevant if a company enters into a Company Voluntary Arrangement also known as a CVA. Or an individual enters into an Individual Voluntary Arrangement which is sometimes referred to as an IVA. During this process the insolvency practitioner will initially act as a ‘nominee’. When acting as the ‘nominee’ the insolvency practitioner will be responsible for pulling together and drafting a proposal for the CVA or IVA. Following the meeting of creditors the insolvency practitioner will become the ‘supervisor’ of the agreement. With responsibility for ensuring it is conducted properly and reporting back to creditors.
What qualifications does an insolvency practitioner have?
To become a licensed insolvency practitioner there is a requirement to pass the JIEB (Joint Insolvency Examination Board) set of examinations and also complete a set number of hours in practice. Not always but in many cases insolvency practitioners have previously worked in accountancy or law and hold qualifications gained whilst working in these sectors.
Who regulates insolvency practitioners?
There are a number of professional bodies the ICAEW, ICAS and IPA all of whom observe the same standards of performance and professional conduct. Insolvency in the UK is regulated under the Insolvency Act 1986.