insolvency practitioner

An Overview of Insolvency Practitioner Services in the UK

As of 2021, there are around 1,600 licensed insolvency practitioners (IPs) in the UK; that doesn’t include the thousands of support staff in the background that help every single one of the UK’s IP in providing comprehensive, professional and highly-experienced insolvency practitioner services for businesses and individuals across the country.

insolvency practitioner

But what is involved in delivering insolvency practitioner services and exactly what services do IPs provide? Let’s take a deeper look into the role of an IP.

What is an insolvency practitioner?

Let’s start with an explanation of what an insolvency practitioner is – it is someone that is qualified, licensed and authorised to act on behalf of a person, partnership or company that is either insolvent, as well as a solvent company. Insolvency practitioners generally work within a law firm, an accountant or a specialist insolvency practice.

To practice as an IP, they must:

  • Have passed the relevant insolvency, or JEIB (Joint Insolvency Examination Board), exams.
  • They must be licensed with one of the UK’s insolvency practice governing bodies, such as the Insolvency Practitioners Association (IPA) or R3.
  • They have to have sufficient experience in handling insolvency work.
  • They have to not only meet the regulator’s strict requirements but also prove they are ‘fit and proper’ to act as an IP.

The ICAEW (Institute of Chartered Accountants in England and Wales) is the largest regulator in the UK. When an IP is licensed with a regulator, they have been given the authority to advise on and take on IP appointments in formal insolvency procedures, such as voluntary and compulsory liquidations, company administrations and receiver-ships, bankruptcy and individual voluntary arrangements, as well as solvent liquidations, i.e. closing a solvent company.

What are the insolvency practitioner services?

Insolvency practitioners can often be found wearing several different hats. In many cases, they act in an advisory role for individuals, partnership businesses and companies who are struggling with debts and need independent, knowledgeable advice on how to resolve the situation.

Not all people, businesses and companies that are struggling with debt problems have to resort to liquidation. A key part of an IP’s role is to help ‘rescue’ a partnership or company, assessing the situation and making the necessary recommendations that may help the partnership or company recover. They may also find themselves advising individuals that have mounting debt issues, working with their creditors to come to an agreed formal arrangement to pay back the debts due and avoid bankruptcy.

However, if it is not possible to rescue a partnership or company, administration, receiverships or liquidation after often the only choice left.

Often IPs will find themselves ‘caught in the middle’ in terms of competing interests. In most cases, an IP will have been working with an individual, partnership or company to try and resolve the debt problems without ending up in a last resort situation. When this happens, they are working on behalf of the debtor. However, if it does go to the last resort, i.e. administration or liquidation, generally the same IP handles the process and thereby has to act in the best interests of the creditors.

An individual, partnership or company is not allowed to enter a bankruptcy, an IVA (Individual Voluntary Arrangement), liquidation, administration, receivership, and MVA (Members Voluntary Arrangement) or CVA (Creditors Voluntary Arrangement) without having an IP appointed.

  • Bankruptcy – an IP acts in the insolvency process on behalf of an individual. In a bankruptcy, the IP will often have to sell the individual’s assets in order to raise the necessary funds to pay their creditors. If this isn’t possible, the IP will negotiate an arrangement with the creditors.
  • IVA – the IP will act on behalf of the creditors of an individual to negotiate a voluntary arrangement whereby the debtor pays back an agreed sum on a regular basis through the IP.
  • Liquidation – there are several forms of liquidation for a company, i.e. compulsory (creditors force the company into liquidation through the courts), a CVA (the company makes the decision to close an insolvent company voluntarily before their creditors force them into that situation), or an MVA (the directors voluntarily close a solvent company). The IP is appointed to handle the process including the sale or transfer of any assets, negotiating with and paying creditors, which is done in a specific order according to the Insolvency Act 1986, and finally dissolving the company.
  • Administration – an IP will act on behalf of an insolvent company to try to either rescue the company or find a buyer for the company.
  • Receivership – the IP is appointed to recover money lent by a ‘secured creditor’, such as a bank.

How are insolvency practitioner services regulated?

To be able to provide insolvency practitioner services, an IP must be a member of, and licensed by, one of the UK’s recognised professional bodies, or RPBs. Representatives of the relevant RPB will visit IPs to make sure their standards are being met every 3 years. In addition to this, IPs are required to continue their professional education, taking part in any training and keeping up-to-date with regulations every year. In some cases, they may need to take part in self-certification programmes.

There are five principal RPBs in the UK that regulate and monitor IPs:

  • The Association of Chartered Certified Accountants (ACCA).
  • The Insolvency Practitioners Association (IPA).
  • The Institute of Chartered Accountants in England & Wales (ICAEW).
  • The Institute of Chartered Accountants in Scotland (ICA
  • The Institute of Chartered Accountants in Ireland (ICAI).

In turn, the RPBs are governed by the Insolvency Service to make sure the RPBs are regulating and monitoring IPs correctly.

Company or individual insolvency is not something that anyone wants to deal with; however, the sooner a financial problem is recognised, the sooner it can be dealt with and the more potential the company has in recovering. If you are considering closing a solvent company using a Members’ Voluntary Liquidation process, contact Simple Liquidation for assistance. For more information on how our professional insolvency practitioners may be able to help your business, contact us today.