What is an Insolvency Practitioner?
An Insolvency Practitioner (IP) is an individual who is licensed and authorised to act in cases where individuals, partnerships or companies have become insolvent. IPs are authorised under the Insolvency Act 1986 to act as the office holder in a range of insolvency procedures. This includes liquidation, administration and voluntary insolvency arrangements.
In simple terms, once appointed, the role of the Insolvency Practitioner is to try and rescue failing businesses while protecting the interests of the company’s creditors. IPs must follow strict legislator guidelines in the course of their work and are monitored by regulators to ensure they do. In most cases Insolvency Practitioners are accountants or insolvency practitioners who work in firms of accountants. To operate legally they must:
- Have passed the insolvency examinations (JIEB exams);
- Have been ‘grandfathered’ in 1986 by having the relevant experience in insolvency work; and
- Be authorised by the Insolvency Practitioners Association (IPA), or by one of the other bodies recognised under the Insolvency Act.
What is the aim of an Insolvency Practitioner?
The primary responsibility of an IP is to rescue an insolvent company if it is in the best interest of the company’s creditors. Depending on the insolvency procedure, they may be required to negotiate with creditors with a view to rescuing the business. Alternatively, they may take complete control of the company prior to closing it down.
In this case they will:
- Sell company assets to repay creditors;
- Collect money owing to the company from debtors;
- Agree creditors’ claims;
- Distribute the money collected after the costs of insolvency have been paid.
Regardless of their ultimate aim in a particular case, insolvency practitioners have a duty to act with care and reasonable skill in carrying out their duties. They must also ensure all creditor groups receive the maximum possible return. This can be achieved by selling business assets for the best possible price, providing regular progress reports to creditors and exercising sound commercial judgement throughout their appointment.
Another key part of an Insolvency Practitioner’s role is to conduct an investigation into the insolvent company’s affairs. They must then submit an online report to the Insolvency Services based on the books and records of the company and the information provided to them regarding the failure of the business.
If you want more information about Insolvency Practitioners, please call Alan Simon on 0208 444 2000 to discuss or email firstname.lastname@example.org.