What is an Insolvency Practitioner, and how can they help me?

If your company is experiencing financial difficulties, or you’re an individual struggling to pay your debts, you may be considering reaching out to an Insolvency Practitioner (IP) for advice. However, many people who haven’t dealt with an IP before are unsure of exactly what an IP is.

Here we cover what an IP is, what they do, and how they could help you if you’re facing challenges with your finances. It’s important to understand the value they can add, particularly during the early stages of financial distress.

What is an Insolvency Practitioner?

An Insolvency Practitioner (IP) is someone who is licensed and authorised to act on behalf of an insolvent individual, partnership, or company. Insolvency refers to the inability to pay one’s debts as they fall due.

An IP is licensed to work with directors of distressed companies (and LLPs) and advise on a range of formal insolvency procedures such as:

IPs can assist with the closure of solvent companies to ensure that maximum value is extracted from the business in the most cost-effective and tax-efficient way possible. This is known as a Members’ Voluntary Liquidation (MVL).

IPs can also give advice to individuals struggling with personal debt and undertake personal insolvency processes including:

An IP must have a license and have also:

  • Passed the insolvency examinations (JIEB exams);

  • Gained experience in insolvency work;

  • Satisfied an authorising organisation (known as a regulator) that they are fit and proper to act as an IP.

IPs have a duty to follow the law. Their work is monitored by regulators (such as the Institute of Chartered Accountants of England & Wales) to make sure they follow it.

What does an Insolvency Practitioner do?

An IPs role varies depending on the nature of the appointment. Essentially an IP will provide advice and guidance to directors and stakeholders of insolvent, or financially distressed companies. Once appointed, they’ll negotiate with creditors, and arrange for the valuation and disposal of assets.

In certain cases, an IPs job is to try and help rescue a business. If this isn’t possible, the IP will aim to:

  • Sell the assets of the person or company who owes money;

  • Collect money due to the person or company;

  • Agree creditors’ claims;

  • Distribute the money collected after paying costs;

An IP’s main duty is to look after the interests of creditors. A licensed IP is able to advise on, and undertake appointments in, all formal insolvency procedures including bankruptcy, liquidation, administration and voluntary arrangement.

Who appoints an Insolvency Practitioner?

An IP can be appointed by various parties including a creditor, the courts, or by the directors of a distressed company.

Occasionally, a creditor who is owed money will begin insolvency proceedings against a company, and the director will be served with a Winding Up Petition. This will start the process of the company being forced into compulsory liquidation.

Most of the time though, it’s the director of a company who consults an IP first. This allows the director to have control of the process, rather than having the process forced upon them by a creditor. Read more about the advantages of a CVL over compulsory liquidation here.

What should I be looking for in an Insolvency Practitioner?

If you need insolvency advice, it’s important that you use a licensed IP.

Be cautious as there are some firms that offer insolvency advice despite not being qualified to do so. Only those who have passed the JIEB exams are licensed and officially authorised to offer advice in insolvency matters.

Before consulting with an IP, it’s worth checking their qualifications and awarding body number to ensure they are fully licensed and regulated. You can check this by entering their details on the Insolvency Service Website.

How do I know if I need an Insolvency Practitioner?

For many individuals and company directors, approaching an IP for help is often done when distress levels have reached an unmanageable point, and they can no longer continue. An IP will be able to step in at this point, assess the person or company’s situation, and recommend the best course of action.

It’s important to know that the earlier an IP is consulted for advice, the better. By consulting with an IP during the early stages, you’ll be giving yourself or your company the best chance to recover, leaving a wider range of options available to you.

At Bailey Ahmad Business Recovery, we offer free and confidential consultations with no obligation to proceed. We will listen to you, take the time to understand you or your company’s challenges and recommend the best course of action so you can plan your next steps with confidence.