What is a licensed Insolvency Practitioner?
Working in insolvency requires expertise and knowledge of the Insolvency Act 1986. Licensed Insolvency Practitioners (LIP) are highly qualified individuals and as such will be the ones processing your case in roles such as liquidator, administrator for a company or a trustee in bankruptcy. These positions can only legally be undertaken by an Insolvency Practitioner (IP).
Should you find your business in financial distress and subsequently need to pursue liquidation or recovery options then you can rest assured that only a licensed and qualified professional can actually process your case. An IP in the end acts as him/herself and not as a company. They will be able to provide guidance and support throughout the entire process, helping you to make informed decisions about your finances and ultimately work towards a more successful financial future.
How does an Insolvency Practitioner help my company?
The LIP will first review your company finances, discuss with you all the available options, and then come up with a plan that meets your needs. Depending on your circumstances, they might suggest a formal insolvency process or some form of rescue or restructuring. They will also provide support and advice throughout the entire process, making sure that you understand all of the options available to you and deal with all creditors on your behalf.
What does an Insolvency Practitioner do?
The Insolvency Practitioners’ main roles are multiple and will change as each company director’s requirements are established and a solution is worked out for that particular business.
However, they do have primary functions which are attached to each and every case and that is to;
- Establish the best solution for the business, whether liquidation or a rescue solution.
- Realise company assets to the best of their ability for the benefit of creditors.
- Investigate company directors to ensure no wrongful or fraudulent activities.
Common types of insolvency procedures are:
- Winding up Petitions
- Company Voluntary arrangements
- Creditors’ Voluntary Liquidation
- Individual Voluntary Arrangements
- Members’ Voluntary Liquidation
Typical roles of an Insolvency Practitioner:
When the IP acts as liquidator, they are trying to realise company assets and return funds to creditors in a set order of hierarchy. Company liquidations can be solvent or insolvent.
Members Voluntary Liquidation (MVL) is a solvent liquidation where directors come together and agree to put the company into liquidation when it is no longer required. The company has more assets than it owes and is often a good way for directors to realise assets, pay off creditors and close the company down.
Insolvent liquidations, as is the case with Creditor Voluntary Liquidation (CVL) is where the creditors are liquidating the company to try and get as much money back as possible before there is literally nothing left due to the fact that the company has become insolvent.
IP’s working in the role of administrator will take a detailed look at the company situation with the intention of finding the best outcome for creditors. As an administrator they are looking to turnaround the company via streamlined practices and cost cutting.
When the IP works in the role of Administrative Receiver, they are working in the interests of a secured creditor. This can be any creditor who has secured status and is looking to get as much of their funds back as possible.
Supervisory role in a Company Voluntary Arrangement (CVA)
The IP will seek the agreement and obtain the votes of the creditors in a CVA which is essentially a structured payment plan whereby creditors come to an agreement on how the funds shall be paid back over a specified time frame.
What qualifications does an insolvency practitioner have?
A licenced Insolvency Practitioner can only offer insolvency services after they have obtained the correct qualifications.
Candidates need to become authorised & regulated by a Recognised Professional Body (RPBs)
Examples of RPBs are:
- Association Chartered Certified Accountants ACCA
- Chartered Accountants Ireland CAI
- Institute Chartered Accountants in England and Wales ICAEW
- Institute Chartered Accountants Scotland ICAS
- Insolvency Practitioners Association IPA
- Law Society of England and Wales
- Law Society of Scotland
- Law Society of Northern Ireland
They need to sit and pass the Joint Insolvency Examination Board (JIEB) exams which run every November and consist of two papers.
- Corporate Insolvency
- Personal Insolvency
These exams are well known for being very difficult and a good working knowledge of insolvency will be required to pass. Each paper is 3 hours long with 1/2 hour allowed for reading time.
Candidates need to pass both papers to be able to receive a full Insolvency license. Licenced Insolvency Practitioners are subject to regular inspections of their work so need to remain diligent and up to date with current legislation and practices.
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