How to choose the right insolvency practitioner for your business
Financial distress can happen to any business, no matter how big or small. If your company faces insolvency, it’s important to seek professional help from a licenced insolvency practitioner (IP). An IP is a professional who can provide advice and help individuals and businesses who are experiencing financial difficulties. They can help you assess your financial situation and advise on how to move forward.
Read on to learn more about insolvency practitioners and how they can help you if your business is facing formal insolvency procedures.
Quick Picks
- What Is a Licensed Insolvency Practitioner?
- What Should Businesses Do When Insolvency Is Likely?
- Types of Formal Insolvency Procedures Dealt by Licensed Insolvency Practitioners
- How Can an Insolvency Practitioner Help my Business?
- What Is the Process of Appointing an Insolvency Practitioner?
- What To Look For In An Insolvency Practitioner?
- How Much Does an Insolvency Practitioner Cost?
- Alternatives To Appointing an Insolvency Practitioner
- Need to Liquidate A Business?
What Is a Licensed Insolvency Practitioner?
A licensed insolvency practitioner is someone who helps individuals and businesses facing financial difficulties. They are experts in insolvency law and have a detailed understanding of the different insolvency procedures that can be used to help businesses recover from their debt problems.
Insolvency practitioners typically have a legal or accountancy background and have experience working with businesses in financial difficulty.
Recognised Professional Body (RPB)
In the UK, insolvency practitioners must be licensed under the Insolvency Act 1986 to undertake insolvency work. Licensed IP means being a member of a Recognised Professional Body (RPB) who that has issued a license authorising that person to act as such.
Insolvency Practitioners Association (IPA)
The IPA is the UK’s leading recognised professional insolvency body of and for individuals and firms working in insolvency practice or in insolvency related fields; or who have made a significant contribution to the knowledge and practice of insolvency; or are studying insolvency.
Institute of Chartered Accountants in England and Wales (ICAEW)
The Institute of Chartered Accountants in England and Wales (ICAEW) and the Law Society also license some IPs.
Joint Insolvency Examination Board (JIEB)
The JIEB exams are the industry-standard exams that all insolvency practitioners must pass to be licensed. Once the practitioner has passed the exams, they must meet the experience requirements of an authorising body. After that, they can apply to be formally licensed.
What Should Businesses Do When Insolvency Is Likely?
The first step businesses should take when they face insolvency is to seek professional help. It will give them the best chance of finding a solution that will allow them to continue trading and avoid a formal insolvency process. There are several different sources for obtaining insolvency advice including from members of the IPA, chartered accountants and lawyers.
There are numerous options available to businesses in financial difficulty, and the insolvency practitioner will be able to advise on which is the best option for the particular business.
Types of Formal Insolvency Procedures Dealt by Licensed Insolvency Practitioners
An authorised insolvency practitioner is a professional who can offer advice on and undertake appointments in all formal insolvency proceedings, including liquidations, company voluntary arrangements, bankruptcies, administration, receivership, and individual voluntary arrangements.
How Can an Insolvency Practitioner Help my Business?
An IP can help businesses in several ways. insolvency practitioners can help by:
- Reviewing the financial situation of the company and providing advice on the options available
- Assisting with the preparation of financial statements and other documents required by creditors
- Negotiating with creditors on behalf of the company directors
- Assisting with the formulation of a monthly payments plan
- Supervising the implementation of the repayment plan, and
- Helping to resolve any disputes that may arise.
The role and duties of an authorised or licensed professional vary depending on the insolvency procedure used. The most common roles played by an IP are listed below.
Administrator:
An administrator is appointed to take control of a company that is insolvent. The role is business recovery and to rescue the company and make it solvent again. If this is not possible, the administrator will sell the company assets so that debts can be paid.
Administrative Receiver:
A secured creditor appoints an administrative receiver to take control of a company’s assets. The aim is to sell the assets and pay off the debts owed to the secured creditor.
Liquidator:
In solvent and insolvent company liquidation, the role of a liquidator is to take control of the company’s assets and liabilities, ensuring that assets are realised and property is distributed fairly among its creditors. IP’s can also be appointed as a provisional liquidator in a compulsory winding up but it is more common for the Official Receiver to take this role.
Supervisor:
An IP will serve as the supervisor of a Company Voluntary Arrangement (CVA) to ensure that the terms of the CVA are implemented and that the company complies with its obligations to pay creditors.
What Is the Process of Appointing an Insolvency Practitioner?
Appointing an IP usually often starts with a meeting between the IP, business owner, company director, and their accountant. During this meeting, the accountant will confirm the company’s financial situation listing who the company owes money to and its assets. If it is concluded that the company is insolvent, the IP will advise on recovery options and the best course of action to take. This may involve recommending that an insolvency practitioner be appointed through a formal insolvency procedure.
Once an insolvency practitioner has been appointed, they will take control of the company’s finances and assets. They will then work with the directors to try and rescue the company or, if this is not possible, wind it up in an orderly manner.
What To Look For In An Insolvency Practitioner?
When choosing an insolvency practitioner, it is important to ensure that they are licensed and regulated according to professional standards. The practitioner should have passed the JIEB exam and be licensed through one of the recognised professional bodies such as:
- Insolvency Practitioners Association (IPA)
- Institute of Chartered Accountants in England and Wales
- Institute of Chartered Accounts of Scotland
- Institute of Chartered Accountants in Northern Ireland
- Association of Chartered Certified Accountants
It is also important to choose an insolvency practitioner with experience dealing with businesses of a similar size and type to yours. It will ensure that they are familiar with the specific challenges that your company is facing and can offer the best possible advice.
For more information on Insolvency Practitioners read our article What is an Insolvency Practitioner – How to Pick the One For You
How Much Does an Insolvency Practitioner Cost?
The costs of appointing a licensed insolvency practitioner will depend on the size and complexity of the company’s financial situation.
For more complex cases, such as an Administration or CVA, the practitioner’s fees will be higher and will depend on the time involved.
For more information on Insolvency Practitioner Costs read our article Insolvency Practitioners Fees: Everything You Need to Know
Alternatives To Appointing an Insolvency Practitioner
The main alternative to appointing an insolvency practitioner is to try and resolve the company’s financial difficulties without professional help. It is often not possible, especially if the company is already facing legal action from creditors.
Another alternative is to appoint non-qualified insolvency specialists to act. However, this can be a very risky option as they may not have the necessary professional indemnity cover, experience or qualifications to deal with your company’s insolvency.
Need to Liquidate A Business?
If your company is in financial difficulty and you are looking for a way to close it, you will need to appoint an insolvency practitioner.
Andrew Bowers FIPA is our licensed insolvency practitioner with over 30 years experience.
As a cost-effective insolvency service provider in the UK, we work with directors and shareholders of struggling businesses to help them find the best solution for their company.
Contact us today for a free confidential no obligation initial consultation.
