We’ve previously written that the government was bringing in new changes to the law surrounding pre-pack administration earlier this month.
After debate in the House of Commons and the House of Lords this week, the changes to the legislation were duly passed by parliament and will formally come into force on April 30th 2021.
While we always approve of any efforts to improve and strengthen the insolvency and restructuring process, it will be interesting to see how the role of the evaluator in the pre-pack process will play out in actual cases.
Some pre-pack administrations involve the sales of a distressed business to “connected parties”. These are individuals with some previous connection to the business - and can include previous directors or management who want to buy the company and run it themselves.
In an effort to improve stakeholders' confidence in this process, one of the legal changes was to have every sale involving a connected party overseen by an independent evaluator.
But there’s some concern within our industry about the status and qualifications of the evaluators.
Colin Haig, President of R3, the insolvency and restructuring trade group said: “We welcome efforts to improve stakeholder confidence in pre-packs, but it may be proved that this legislation has missed the mark.
“Sales to connected parties in pre-pack administrations will now be subject to creditor approval, or review by the new independent Evaluator position.
“The rationale for this is clear but the practicalities around ensuring that an Evaluator is a fit and proper person is where the regulations could fall down.
“These regulations effectively leave it to the market to regulate the Evaluator position. A far better alternative would have been for the Government to agree to maintain a list of approved Evaluators.
“This might have meant an additional administrative burden for them, but it would have given stakeholders greater confidence that these reforms were robust rather than just the easiest option for the Government.”
Some of the speakers in the parliamentary debate raised concerns about the prospect of “opinion-shopping” when it comes to evaluators - only appointing one that happens to agree with your valuation or choice of buyer.
One of the speakers in the debate, Lord Foulkes of Cumnock, said: “As others have done, I also want to ask about the Evaluators, who will be given significant responsibilities.
“It would be helpful to know what qualifications will be required to act as an Evaluator and will the Government consider a register of approved Evaluators maintained by the Insolvency Service?”
The Insolvency Minister Lord Callanan didn’t agree to any changes in the legislation but said that the Government may revisit banning connected party pre-pack sales or further reforms if the regulations prove not to be working as intended.
Chris Horner, Insolvency Director with Business Rescue Expert, reiterates our position.
He said: “Getting an Evaluator, who will act as a qualified valuer, to report on any sale and putting their professional opinion, with any supporting evidence, in writing provides transparency and clarity to any administration sale.
“We have always used professional third parties to provide their opinion on transactions we have initiated or overseen so it’s encouraging that our approach has been codified into law as legal best practice.
“Further cementing trust in our industry and our procedures will be paramount in future as government financial support for businesses is withdrawn and more will be seeking professional insolvency advice and help as they decide what direction they can take their business as a result.”
If 2020 was a Year of Lockdowns then 2021 could well be a year of challenge and change.
As more businesses begin to reopen, free from previous restrictions, they might re-emerge into a new, unfamiliar world.
We don’t know how customers will react without restrictions and how many behaviours adopted in lockdown such as online shopping, dining in and expanded home deliveries will become permanent and replace old patterns that these companies relied upon.
A free initial consultation with one of our expert advisors will be the first step in a comprehensive recovery plan or pivot to give a company every chance of trading successfully in our new environment.
Get in touch today so you can start making the decisions and changes you need to before it becomes too far down the line to change the destination.
For some reason, they keep being reported in the media as being some sort of “magic bullet” solution to businesses in financial difficulties.
It’s still a specialist procedure that has to be conducted by an experienced and qualified insolvency practitioner and still requires the approval of creditors before a business and its assets can be sold quickly or otherwise as a going concern.
We see at least one story a week about a business going through the procedure. This week it’s London-based, food-to-go providers Abokado to be the focus
There’s no quick-fix solution. In the case of Abokado, they have been bought out in a pre-pack administration this week relatively quickly but 150 staff have lost their positions and the new owners still don’t know when any of the 19 branches will reopen as their main client base are lunching office workers.
Regardless of the assets they’ve purchased, they will also have to underwrite any expenses with no income coming in for the immediate future.
Pre-pack administrations are also in the news because the government has announced plans to bring forward new legislation to force mandatory independent scrutiny of any agreements where connected parties - people who already have some connection to the business such as existing directors or shareholders - are involved in the purchase.
There’s already a body that can scrutinise such deals - the pre-pack pool - but referral is completely voluntary and the government has decided that in an attempt to improve confidence and transparency for creditors that their interests are being protected that an element of essential oversight is required.
Lord Callanan, Minister for Climate Change and Corporate Responsibility said: “This government is committed to creating a transparent and fair insolvency framework, and helping distressed businesses explore all options to get themselves out of trouble.
“Pre-pack sales are a really useful tool to help save troubled, but viable, businesses and play a critical role in helping to protect our economy and preserve livelihoods.
“As the UK continues to tackle Covid-19 it’s more important now than ever that people can take confidence in the insolvency process. Connected parties such as existing directors and shareholders who know the company well can be ideal buyers.
“But in the rush to secure a sale, creditors’ needs should not be forgotten. The new law we are introducing will ensure such deals are properly scrutinized, to help balance the interests of everyone involved.”
While any attempt to promote and protect the robust insolvency regime in the UK should be welcomed, attempts to close loopholes should not be at the expense of creating new ones elsewhere.
R3, the trade association for insolvency professionals, believes they might just have found one.
In the small print of the proposed new regulations is a small but significant mention that deals could be reviewed by an “evaluator” if any of the parties to the deal believe that they have the requisite knowledge and experience.
R3 President Colin Haig identifies that this means that “effectively anyone will be allowed to provide an independent opinion on a connected party pre-pack sale, which risks abuse of the system that undermines the entire rationale of these reforms.”
The proposals show that a connected party purchasing a business out of administration “may obtain more than one report” from an evaluator. This could open the process to a level of “opinion shopping” where well-financed buyers would be able to find various opinions that would all completely coincide with and support the validity of their case.
Insolvency practitioners like us have to keep up to date with all the legal and professional developments within the industry including any new regulations that could benefit clients and businesses seeking our advice on what the best course of action to take is.
A pre-pack administration can be the right solution for a company in one scenario as a CVA, administration or liquidation can be the right choice in another.
No matter what obstacles your business is facing right now, we’ll have worked with a business in the same or similar position and can advise you on the next steps to take regardless of how the rules may change in the future.
Taking the right action at the right time is always the best solution and the first stage of a successful solution is always to take advice.
Contact us today and one of our expert advisors will arrange a free initial consultation so we can understand what your situation is and we can explain what your immediate options are.
You might be surprised by how much room you have to maneuver but the longer you leave it, the less room and time you’ll have to set your business back straight.
Sport is a central pillar of British society.
Not just in terms of shared experience and associated culture but also in taking part and the numerous benefits it brings through exercise and social engagements. The lockdown has been particularly tough for sports enthusiasts.
Economically, like every other sector of the UK economy, sport has taken a big hit. We’ve previously written extensively about sport and insolvency but the coronavirus pandemic and lockdown have acted as an accelerant.
More than a game?
Not for the first time, football and it’s response to the predicament has split it down the middle. Fans, players, managers, CEOs, broadcasters, medical staff and government all have a vested interest in how the sport responds and so far it has been a little of everything.
Non-league football up to and including the National League have declared their seasons over as has League Two in the EFL. They have completed their season using a points per game formula to obtain a final league table and have accordingly promoted the top four teams.
League One are deciding how they will proceed but seem like they will vote to finish in a similar style while the Championship and Premier League are pushing ahead to play on and complete their seasons behind closed doors.
The government has given them permission to begin modified and social distanced compliant training this week with an expected resumption date to be June 12th under the aptly named “Project Restart”.
Playing in front of empty stadiums will be a new experience and not necessarily a positive one. The German Bundesliga restarted this week and the experience was described as sterile and unsettling.
Crowds are the scenery, backdrop and special effects at matches and without them the experience might not be as compelling as the authorities are hoping it will be for viewers and broadcasters.
Finishing the season and maintaining sporting integrity are just two of the issues facing football. The financial outlook for teams in an extended offseason is another.
Swindon Town Chairman Lee Power estimates that without immediate financial support from the government or higher up in the football food chain then 30/40% of clubs in League One and Two will be at risk of insolvency.
This is in addition to many lower league footballers contracts running out at the end of June and some teams such as Oldham Athletic and Macclesfield Town already struggling to pay staff on time.
Even if the season is completed in this truncated format, there will still be restrictions placed on crowds when the following season is due to start and fans might not be allowed into stadiums until at least 2021.
Football finance expert and insolvency practitioner, Gerald Krasner who has been involved with several football administrations underlines the financial imperative for restarting football at a time when less high profile industries are still locked down.
He said: “The reality is that people have managed without football for more than a month now and there’s a real danger that unless the momentum can be regained and fans can begin to watch matches on TV again, the impetus will be lost and the draw of football will be diminished in the long term.
“Unfortunately those clubs with wealthy foreign owners may not necessarily be immune from disaster either. If that was to happen, the television money would soon desert the game too.
“Overseas owners will be forced to respond to the effects of the global pandemic on their own finances and business interests, and for some that could mean that ownership of an English football club is simply no longer viable.”
And this, regardless of health and safety, is the prime consideration for the elite of English football.
Any “one” for Tennis?
Other sports, while not taking a direct lead from football, will be at least watching closely to see how any solutions play out.
Rugby and Cricket are looking to hold some kind of competition to avoid their 2020 seasons being written-off and Silverstone have announced that they are hoping to stage two Formula One races albeit in front of empty grandstands.
Golf and Tennis appear to be faring better at least in terms of participation as they were also allowed to restart in the first wave of recreational reopenings recently.
David Rickman, Executive Director of Governance with the R&A said: “We’re fortunate that golf lends itself to social distancing, so by making a few relatively small changes to the rules and the environment in which we play, we can make it safe for golfers.”
Of course most golf clubs will be operating at a minimal level initially as their bars, restaurants, golf shops and practice facilities will all remain closed.
Additionally, a majority of staff including green keepers remain furloughed so playing will be even more of a challenge for some although the clubs themselves will welcome any influx of income.
Now unlimited exercise is allowed, the demand for facilities will be as large as it is immediate.
Playgrounds, outdoor gyms and ticketed outdoor leisure venues will still remain closed but one-on-one sports such as tennis, basketball or even batting and bowling in cricket nets is now permissible as long as social distancing rules are observed.
All of these changes are based on the latest best practice and advice based on the Covid-19 infection rate continuing to fall. Any second wave of infections, or worse any that could be directly attributable to a sporting event, might mean a second lockdown and further restrictions throwing any further plans into doubt.
One of the key tenets of sporting faith is hope. There’s always another match or season. Always the chance to start again and win this time if you’ve suffered a defeat.
In business, administration can offer a similar hopefulness and route to redemption. A lot of otherwise good and profitable companies are finding themselves in terminal circumstances because of the Covid-19 pandemic but there could be a way for them or any business in difficulty to dust themselves down and start again on a level playing field when it’s time to go again.
If this sounds appealing or you’d like to know more than you can get in touch with us here.
We’ll arrange a convenient and free initial consultation with one of our expert team of advisors who can begin our dialogue.
Once we have a clearer view of your business, it’s financial situation and immediate circumstances, we can help you plan out an effective and efficient way forward for you and your business.
Some see them as corporate grim reapers whose arrival signifies the imminent demise of any business that appoints them.
Others see them as petty bureaucrats who are never happier than when they’re demanding to know the number of pencils a company has purchased and used between March 1993 and June 2007.
The truth is they’re more like business mechanics.
It’s their job to look under the bonnet of a misfiring company to see what’s broken; whether it can be repaired or replaced and if a whole rebuild is justified in the first place.
And like any good mechanic, they have a range of specialised tools available to them that are suited for the different tasks they face.
Instead of a wrench, screwdriver and socket set, an administrator can use Creditors Voluntary Liquidations (CVL), Company Voluntary Arrangements (CVA), Company Dissolutions and many other appropriate techniques and instruments when they’re needed, depending on the issue and the solution.
Which brings us back to “light touch” administration.
What is occurring, specifically with the case of Debenhams, is that while the administrators have ultimate responsibility and authority bequeathed to them as part of the administration process, they have decided to delegate the day-to-day management and short-term functions of the business to the existing management team.
As well as being a cost-effective solution, it also provides a degree of continuity and certainty to employees at a stressful time and allows the administrator to concentrate on their main task - devising a strategy to enable the company to survive in the longer term.
There are exceptions to every rule and if an administrator decided to bring in their own management team to run a company then they’d be within their rights to do so. They remain ultimately legally responsible for any decisions taken while the company is under their purview.
As for a “light touch” - there’s been no magic wand waved and no new rules have been plucked out of thin air. Nothing has fundamentally changed.
What has happened is that the Department for Business, Energy and Industrial Strategy (BEIS) suggested some tweaks to existing insolvency law including introducing a moratorium on debt recovery that would bring increased protection for companies facing insolvency and allow additional time for administrators to build a restructuring and rescue plan.
However any proposed changes would not become law until they were passed in Parliament and to date, no timetable for debate has been published.
Chris Horner, Insolvency Director of Business Rescue Expert, who has personally overseen numerous administrations cuts to the chase:
“Administration is not a one-size-fits-all solution and never has been.
“One of the reasons why the UK’s insolvency regime is respected across the world is because it retains a good balance between the interests of debtors and creditors while still being agile and entrepreneurial enough to adapt to the circumstances it applies to.
“Light touch” administration is nothing more than a regular administration but the way it has been applied in one specific case happens to be different from another one.
“It’s like describing your doctor as a magician because he gave you one medicine to treat pneumonia and a different one for indigestion.”
One of the reasons you hire a professional is not only to do a job but to apply the benefits of their advice they’ve built up from years of training, practice and experience.
Insolvency Practitioners are constantly staying up-to-date with legal and practical changes and new support measures that have been unveiled in the past month and will be announced in the weeks and months to come.
If you think you need to get a professional’s opinion of your business and it’s prospects at the moment then now is the time to get in touch.
We’ll arrange a convenient and free virtual initial consultation to discuss what issues you’re facing and how you can best meet them so you can be stronger when life returns to something resembling normality.
If insolvency law changes then you’ll read about it here first. Now if you’ll excuse us, our phone just rang.
In this blog, we’re going to set out exactly what going into administration means; what it can and can’t do for a business and what the various stages of the process are.
What is administration?
Firstly - under The Insolvency Act 1986 - administration is defined as a legal process with the aim of achieving a statutory objective including rescuing a potentially viable business that’s insolvent due to cashflow problems.
Who runs the administration?
A qualified and licensed insolvency practitioner will be appointed either by the company directors, a creditor or the court in order to legally fulfil the administration process. You can’t do it yourself or get your friend to do it.
What does an administrator do?
The first thing administration does is put the company into a statutory moratorium which pauses all creditor enforcement actions and debt interest while the administrator’s plans are put in place to restructure the business or ready it for sale.
A company can continue to trade if it’s in administration but it’s not business as usual.
Everyday control and the daily management of a company passes from the directors to the appointed administrator. The directors & managers still have to come into work but the administrator has to OK any expenditure over and above the essential to keep the business running.
The administrator has up to eight weeks to formulate a series of administration proposals on how they will proceed.
The creditors of the business then have to vote to approve these proposals, which requires a majority to be accepted.
If there’s no reasonable chance that the company could be saved then it’s the administrator’s job then to get the best return for creditors if the business is going to be wound-up.
What if a business is going to be sold?
Whilst it’s in administration a company can continue to trade while the administrator can look to sell the business either wholly or individual assets including:
If a whole or part sale of assets can’t be achieved then those assets could be liquidated and any proceeds from this paid to creditors.
Who gets paid first?
If the administration involves the sale of all or part of the company’s business then any proceeds are distributed in a strict order of priority. These are:
*HMRC are due to move into the preferential creditors category in April 2020.
How much is estimated to be recovered and distributed along with a likely timescale will be included as part of the administrators proposals.
What happens next?
After 12 months have passed then the administration will automatically come to an end unless the administrator asks the court or creditors for an extension.
If the administration has concluded then there will most likely have been one of the following outcomes:
Administration is a legitimate path to turn round an otherwise viable company, protect jobs and allow a business to flourish after a period of difficulty.
If you feel your business has a chance to be better than its current results show then get in touch with us.
One of our team of experienced, expert advisors will arrange a convenient, free initial consultation where you can outline your company’s current position, let us know any other information we might need and we can begin to work on a plan for you that’s both efficient, effective and realistic.
After 55 branches were closed in 2019 under a Company Voluntary Arrangement (CVA) and rents reduced in others - their first quarter sales update in July was much anticipated. The results were disappointing to say the least.
Total UK sales declined by 23.2% and online revenue was down 12.1%.
Now Mothercare is in administration with all remaining 79 UK stores set to close along with the loss of 2,500 jobs, six weeks before Christmas.
Critics are now publicly questioning whether CVAs are just delaying the inevitable, citing recent examples such as Carpetright, House of Fraser and Toys R Us.
George Macdonald of Retail Week said that in the case of Mothercare, the CVA was never going to be a silver bullet.
He cited other factors at play including the failure to make up the loss of online sales, the incursion by other retailers into its core categories and ultimately, a failure to engage with its target customers who could turn to alternative sources for specialist advice and recommendations.
He continued: “Despite the poor track record of so many CVAs, landlords may still hesitate to swing the axe by not backing them because they won’t want to be blamed for job losses.
“If they’re unconvinced by turnaround plans, they’ll be increasingly ready to dismiss retailers’ pleas. The alternative of empty premises is what many landlords are being left with anyway.
“Landlords will still approve some CVAs but it will be on a case-by-case basis and only the most compelling will win support. It’s evident from the push-and-shove that accompanied Arcadia and Monsoon’s CVAs, and Mothercare’s inability to address its UK problems that will further undermine the process.
“While the latest CVA failure may not be enough to signal the death knell yet, in the future, a thumbs-down from landlords must be increasingly likely.”
Rivals Mamas & Papas are in the same position but are approaching it in a slightly different way.
After posting a £2.38m loss for the second consecutive year, the company has been sold to former owners Bluegem Capital in a pre-pack administration deal which sees six unprofitable stores close but allows the remaining stores to remain open and trade.
Riccardo Cincotta, Mamas & Papas executive chairman said: “These actions are always difficult but they are also necessary in a challenging market to ensure Mamas & Papas achieves its considerable future potential.
“We will continue to review our store portfolio in the light of customers’ changing behaviour and we remain fully committed to an omni-channel offering that reflects their evolving needs.”
Mamas & Papas went into a pre-pack administration which differs from a regular administration in several ways.
Pre-packing creates a seamless transfer of assets and employees. It reduces redundancy requirements because it allows continuity and keeps a higher value in the business as a result.
This will most likely generate a higher return to creditors than if the company was liquidated by continuing to trade as a going concern.
Chris Horner, Insolvency Director of Business Rescue Expert said: “Administration and insolvency are effective tools when used appropriately but the most important thing is to work with a professional insolvency practitioner to establish what would be the best solution for you and your company.
“The situation with Mothercare and Mamas & Papas is interesting because you have two similar companies operating in the same marketplace that have approached essentially the same problem in two different ways.
“Mothercare was able to use the CVA procedure to cut costs, but what it also required was a huge capital injection to update stores, and massively increase its online marketplace. Conversely, it is hoped that the new owners of Mamas and Papas recognise the gigantine task in front of them, and having shaved debt, will also provide the cash needed to modernise. Only time will tell”
Administration is probably one of the most widely misunderstood business terms being used today.
We’ve explained what a lot of the associated terms mean, the cost and likely timescales elsewhere on our site but sometimes the best thing to do is to talk.
Contact us and arrange a convenient free initial consultation with one of our expert team of business rescue advisors
The administrator must provide copies of their proposals to all creditors within 8 weeks of the administration commencing. The proposals must then be considered within 10 weeks of the start of the administration. The main content of the administrator’s proposals are as follows:
Alongside the proposals, the administrator may also seek approval for the payment of pre-appointment fees and expenses. However, if these have already been paid, they will simply provide disclosure of this.
The administrator’s proposals must also detail which purpose of administration is to be met. These purposes must be considered in the following order:
The administrator must cover each purpose in turn as to how they believe it cannot be met, until they determine the purpose which can be met. This is due to the purposes being listed in the order most advantageous to least to creditors and must therefore also be attempted in turn.
The information and timings relating to the administrator’s proposals will be more detailed and much shorter if there is a pre-pack asset sale. Where a pre-pack has taken place, the administrator should deliver the proposals to creditors within 14 days of appointment. However, they must also provide a statement on the pre-pack within the first week of the administration. As a result, it is common for the two documents to be combined and the proposals to be sent out within a week.
The statement or administrator’s proposals must detail all of the above content as well as:
The additional information is required to provide reassurance to creditors that the pre-pack route will provide them with the best outcome from the administration. 50% of voting creditors must approve the administrator’s proposals in order for them to be passed. Therefore, if creditors feel the pre-pack asset sale was not justified, they may vote down the administrators proposals. Alternatively, they may modify them to appoint their own liquidator in investigate the circumstances of the sale. It is, therefore, a good idea if you are considering the pre-pack administration route to engage fully in the process and seek an opinion from the pre-pack pool.
The administration process is only designed to last one year and will automatically come to an end after this time period as elapsed. The administrator may seek to extend the administration with consent from creditors or the court where the matter is complex. However, the administrator’s proposals must detail how the administration will ultimately come to an end. The possible exit routes for administration are as follows:
The administrator’s proposals do not need to specify a single exit route, but may specify multiple options to exit the administration. The multiple options may depend on the overall level of realisations within the administration, after the proposals, as well as the outcome of the administrator’s investigations.
If your business is in early stage financial difficulties, administration may be an appropriate option to help rescue your business as a going concern. Early contact with our business rescue experts for advice can make the difference between keeping your business trading or a complete shut down.
As mentioned above, a notice of intent indicates the business is looking to appoint an administrator. This is an option for those companies looking to identify a solution to their financial issues and looking for immediate debt advice. The notice of intent is filed at the court. If accepted, any action by the creditors must then be agreed upon with the court. When, the notice of intent has been filed, the company receives a moratorium for a period of 10 business days. The notice of intent should only be filed if there is a genuine intention to place the company into administration.
Where a notice of intent has been filed, but there has been no appointment of an administrator in the 10 business days, it’s possible to submit a further notice. This would result in another window for the moratorium to be put in place. However, you must err on the side of caution when filing multiple notices. The court may view this as an abuse of the ‘breathing space’, providing you with more time to consider your options. However, they may offer further moratorium if you can identify a solution has been identified and you are working towards a viable option for the business. It’s important to note this extension must be in the direct interest of the creditors and the repayments owed.
The company directors or floating charge holders (QFCH) can file the notice of intent. However, you cannot file the NOI in the absence of a floating charge holder on which to serve the notice. If you do see this as your only option, and have received debt advice prior, you have five business days minimum to provide the written notice to the QFCH. Typically, the floating charge holders are the bank, and this window is to provide them an opportunity to appoint their own administrator.
As mentioned above, once the notice of insolvency has been filed, creditors are not able to take further action. To do so, they must seek the approval of the court. However, this is unlikely if the notice has already been accepted given the short timescales.
The most important thing you can do when you begin to notice any financial issues is to seek immediate debt advice. The earlier you speak to a professional for guidance, the more options there are available for your company. If you leave it as late as possible, your creditors could submit a winding up petition, which, generally, results in complete closure of the company.
Administration is often used as a chance for company restructure. Recently, the company administration procedure has hit the headlines, with the likes of Poundworld and Toys R Us entering the insolvency procedure. House of Fraser has also been in the news and is currently negotiating a CVA to make repayments to creditors. This was similar to the initial Toys R Us plan, but they failed to make their repayments, thus entering administration.
The company administration procedure must be sanctioned by a licensed insolvency practitioner as the most suitable after any other alternatives. Likewise, the issue of creditor dividends must be taken into account. Pre-pack administration, for instance, can result in much higher returns for creditors and is in their interest.
If you do believe administration is the next step for your business, speak to our business rescue experts today for free, confidential advice.
A licensed Insolvency Practitioner, or IP, is an individual authorised under the provisions of the Insolvency Act 1986, to deal with personal and company insolvency appointments. When someone refers to a firm of insolvency practitioners, there will, typically, only be a small number of licensed IPs accompanied by appropriately trained support staff.
A licensed insolvency practitioner will often be known under several different designations including:
While an insolvency practitioner will, generally, be instructed by the directors seeking company insolvency advice or by a debtor, they have a rapidly changing role. In all cases, they will usually start out by advising the board, moving to the point where they are overseeing the balance of interests of both parties. They can then rapidly move to acting solely for the creditors in instances of terminal company insolvency.
The overall overriding duty, no matter what role they are undertaking, is to maximise the return for creditors. This can include realising assets, collecting contributions and often uncovering hidden assets, effectively lifting the corporate veil where necessary.
Licensed insolvency practitioners are brought in to resolve complex situations. Company insolvency is complicated, and, therefore, insolvency practitioners act in accordance with the rules set out in Insolvency Law.
As mentioned above, the challenges for an insolvency practitioner can vary depending on the situation, but can include:
It is also not possible to enter into the following procedures without involvement from a licensed insolvency practitioner, or the official receiver, at the insolvency service overseeing the matter:
Where an insolvency practitioner has to step in to take direct control in a company insolvency, they must report on the conduct of the directors to the insolvency service in the first three months. This can lead to the insolvency service taking disqualification action against the directors.
The general oversight of insolvency practitioners will be dealt with by their recognised professional body (RPB) who issued their license. In turn, the RPBs are overseen by the Insolvency Service, ensuring they are correctly monitoring their license holders. To qualify for an insolvency license, an individual must:
The actions of insolvency practitioners are reviewed by their RPBs, under their own standards. For example, the Insolvency Practitioners Association will conduct monitoring visits every three years, with self certification on cases in between. RPBs will also require their licensed IPs to undertake continuing professional education every year, to ensure they remain up to date in their training.
Insolvency practitioners are heavily regulated professionals with multiple layers of oversight and guidance to which they must adhere. Dealing with the affairs of insolvent companies is a highly technical role, so when seeking advice, you should always ensure you are dealing with a licensed IP or their firm directly, and not a third party referrer. Our Business Rescue Experts are overseen by the Insolvency Practitioners Association, so by contacting us, you can be sure that you are in safe hands.