What is an Insolvency Practitioner? Their Role and Duties
Understanding what is an Insolvency Practitioner
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:
- Trustee in bankruptcy
- Nominee or supervisor of a voluntary arrangement
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.
What do Insolvency Practitioners do?
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:
- Dealing with and potentially directly running any type of business
- Piecing together what went wrong in the company and reporting this to creditors
- Taking steps to preserve jobs and rescue corporations where possible
- Dealing with complex legal claims where there are parties whose actions contributed to the company insolvency
- Acting as a negotiating intermediary between debtors and creditors to find suitable repayment solutions to avoid insolvency
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:
- Creditors Voluntary Liquidation
- Members Voluntary Liquidation
- Compulsory Liquidation
- Individual Voluntary Arrangement
- Company Voluntary Arrangement
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.
How are Insolvency Practitioners Regulated?
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:
- Have passed the JIEB examinations
- Meet the practical experience criteria of their RPB
- Demonstrate they are a fit and proper person to be in this position of trust
- Have a general insolvency bond and professional indemnity insurance policy in place
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.