If your business is confronting financial difficulties or experiencing a formal insolvency process, like liquidation, it’s likely that you will look to enlist the assistance of a licensed Insolvency Practitioner (IP). The majority of the insolvency practitioners will have skilled & trained as accountants or insolvency specialists however, what does an insolvency practitioner exactly do? Today, we are going to discuss what is an insolvency practitioner is & how they can assist your business when in financial distress.
Insolvency Practitioner – In detailed information
An insolvency practitioner is a licensed professional who is allowed to act on behalf of or with regards to partnerships, individuals, or firms that are insolvent.
As an insolvency practitioner is hired to a business during times of financial trouble, their main roles are essentially that of trying to rescue the business. When each and every avenue has been explored in reference to saving a business, an insolvency practitioner might consider other options. The main duty an insolvency practitioner holds is to act with controlled skill & proper care while carrying out tasks & to act in the best interests of lenders at all times.
What does an Insolvency Practitioner do?
An IP will explore all avenues of financial restructuring in order to assure that the most convenient option for the business is selected. It might include:
- Selling the assets of the individual or business who borrow money;
- Collecting any money which is due to the individual or company;
- Agreeing claims with any lenders;
- Diving all collected money when expenses have been taken into account.
When the details of claims from lenders have been received & adjudicated upon, the insolvency practitioner can begin to chase a dividend – it’ll only take place but, if the funds are available. And if an IP has been hired as an advisor to a business board prior to the starting of a formal insolvency process, they’ll offer advice to the directors & set out their responsibilities at this time.
And depending on the insolvency process, the insolvency practitioner might be needed to carry out investigations into the business’s affairs & the conduct of any director in office in the 3 years before to the date of insolvency. Well, the investigation stage of this entire thing is therefore crucial & it’s actually imperative that the IP is of the highest caliber.
What roles can an IP hold?
Within a firm that has gone into insolvency, an IP can be hired for a number of roles. It can be the role of:
- Provisional liquidator
- Supervisor of a CVA (Company Voluntary Arrangement)
- Administrative Receiver
- An Advisor to the board of business directors for assisting them through the process of insolvency
And depending on the role an IP is appointed within a business or firm, the role will be performed in order to liaise with lenders, negotiate terms & realize properties and assets. If a business is in decline & managing towards insolvency, a professional IP can be brought on board to guide & put in place preventative measures in order to ward off insolvency.
What duties do IP have?
The IP has certain tasks & responsibilities that they’re expected to do & fulfill. Each & every role undertaken by an professional IP within a business will have a some different remit:
Provisional Liquidator – Usually, this role is taken up to preserve the assets of a company that is in trouble of experiencing insolvency. A professional IP will be tasked with safeguarding the lenders, assuming that all assets that can be available when the insolvency process starts are still in place when it does start. The provisional liquidator doesn’t interfere in the realization process of the assets.
Liquidator – When it comes to liquidator, the IP undertakes the realization of business assets during Company Liquidation, dividing all funds equally between the listed lenders. And in the compulsory liquidation, or creditors’ voluntary liquidation, the Liquidator will have complete control of all factors of the company, winding up the business affairs & investigating the conduct of each & every directors.
And when it comes to solvent liquidation, the IP has a duty to divide all funds equally amongst members & can conduct for all lenders & members in order to vote on whether the liquidation proposal needs to be accepted or not.
Administrator – An Administrator will usually be brought on board during business Administration for plenty of reasons:
- To rescue the business.
- To get the bestest outcome for all lenders if the firm can’t be saved & should be liquidated.
- To realize the firm’s assets in order to pay the preferential & secured creditors.
Administrative Receiver – Well, this role is generally undertaken on behalf of a secured lender (for instance a bank), & is strived at realizing the business assets with the view of making a monthly payment to the secured lenders.
Supervisor of a CVA – These duties are strived at assuring the terms of a CVA are met fully, with repayments distributed in the correct manner between lenders as per the agreement.
What should you look for while hiring an Insolvency Practitioner for your business?
There are certain aspects that need to be considered while looking for a professional & highly qualified insolvency practitioner. Not only should you be completely comfortable around the person who is working on your business’s finance oriented problems, however they must be accredited as well as frequently regulated.
A reliable and trustworthy insolvency practitioner should l have:
- Got significant amount of experience working within the insolvency industry;
- Passed each and every relevant insolvency exams (JIEB exams);
- Got approval from a regulatory body recognising that they’re completely fit & proper to act officially as an IPr;
- Got a license.
Each and every affairs relating to insolvency in the UK are always regulated by the 1986 Insolvency Act & professional IPs are regulated by some professional bodies. These might include:
- Institute of Chartered Accountants in England & Wales (ICAEW)
- Insolvency Practitioners Association (IPA)
- Institute of Chartered Accountants in Scotland (ICAS)
- Association of Chartered Certified Accountants (ACCA)
How much does a professional insolvency Practitioner cost?
The expenses of involving a professional insolvency practitioner in your business’s financial affairs can differ hugely depending on the method that is undertaken.
For more common & often straightforward formal insolvency processes like Members Voluntary Liquidation or a Creditors’ Voluntary Liquidation (CVL), an IP’s charges are generally a standard one-off fee agreed upon in advance.
And in case of more lengthy processes, like Company Voluntary Arrangements (CVA) & Administration, Insolvency Practitioner charges are usually paid in monthly installments. And these will last as long as the selected process does & might be deducted from funds collected for lenders.
And in any case, it is always suggested that you discuss all these possible options with your insolvency practitioner beforehand. On the other hand, get a free quote estimate in order to check out what involving an Insolvency Practitioner can cost you.
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What qualifications do professional IP have?
The majority of insolvency practitioners have an Accountancy or legal background & will have a relevant qualification & degree, that brings them in line for insolvency roles.
In order to become a licensed insolvency practitioner, an individual needs to crack the examinations set by the Joint Insolvency Examination Board (JIEB). Moreover, they can then go out & get the practical knowledge & relevant experience that the majority of the insolvency firms require from their staff before appointing.
How to find a professional Insolvency Practitioner?
So, as you have explored the majority of the key points on the topic of insolvency practitioners, hopefully, now you feel a lot more informed on the topic of insolvency practitioners & how they might benefit your business. If you need any further assistance or advice however, we would be happy to help.
The Insolvency professionals offer personable & professional advice that can assist you to safeguard your business. We’re available 24*7 to speak to you through your queries & all the business situations today, via telephone or email. We have assisted a large range of businesses within different industries to obtain greater control over the destiny of their company during the crisis times.
Well, if you’re based in the UK, you can opt for our services at your convenience. We offer professional insolvency services in a large area of the UK..
Get in touch with us today to explore how our professional Insolvency Practitioners can help you & your company.