If your company is experiencing financial challenges or distress, you will likely seek a professional’s assistance for you and your business. An Insolvency Practitioner (IP) is well-placed to assist you in your current circumstances and navigate your business towards the best solution. However, if you have yet to deal with an IP, you may be unaware of how they can help, what their duties are and what appointing an IP entails. Here, we consider everything a business owner needs to know about an Insolvency Practitioner and their skills and responsibilities.
What is a licenced Insolvency Practitioner?
A licensed Insolvency Practitioner is a highly qualified professional who has successfully passed the rigorous JIEB (Joint Insolvency Examination Board) set of examinations. This is the sole pathway to becoming a qualified IP. It’s worth noting that many licensed IPs may have acquired other professional qualifications, such as accountancy or legal qualifications, before undertaking the JIEB exams. This diverse background often leads them to specialise in the legalities of insolvency, further enhancing their expertise.
A licenced IP is someone qualified to act on behalf of companies and individuals when facing business distress or insolvency. An IP can also assist with a range of business advisory roles that challenged companies may be facing and aid directors of solvent companies who wish to bring their business to a legal and profitable close.
How is an IP appointed?
In most cases, an IP is appointed by a company director who is seeking assistance with a significant issue within their business. For example, a lender, creditor, or another stakeholder may have requested an Independent Business Review, which will be conducted by an IP. A director may also wish to close down their business in the best possible way for its stakeholders and creditors so that there are no future repercussions, which an IP can fulfil. It is important to note that for an IP to be able to progress with the business, a Letter of Engagement will need to be completed.
In matters of compulsory liquidation, the courts will appoint an Insolvency Practitioner as the Official Receiver to conduct the liquidation process to its conclusion.
What are the duties of an Insolvency Practitioner?
An IP will have different duties depending on the business’s situation and the insolvency process they are appointed to conduct. Here are two key examples of an IP’s role and their duties.
Administrator
Administration is a formal insolvency process, which puts an immediate ring fence around the company and its assets so that no creditor can start or continue action to recover their debts.
In this scenario, an Insolvency Practitioner is appointed as the Administrator. Their role is to realise a better outcome for creditors, whether by arranging a company sale or facilitating an ordered shutdown of the business.
Liquidator
Liquidation is the complete dissolving of a company. A Liquidator, who must be a licensed IP, is appointed to take control of all company assets and convert these into cash for distribution.
In an insolvent liquidation, an IP distributes whatever cash is left over after costs to the company’s creditors. This distribution is done in accordance with the priorities set by the Insolvency Act, a process often referred to as the ‘insolvency waterfall’.
In a solvent liquidation, such as a Members’ Voluntary Liquidation, the directors and shareholders will receive the proceeds of the company’s liquidation.
Other Insolvency Practitioner roles
An Insolvency Practitioner can also take on various other roles, both in an official and unofficial capacity. An IP is well-placed for these advisory positions because of their broad and thorough knowledge of business profitability and decline. Some examples of these roles are listed below:
Independent Business Review (IBR) defence
A lender may approach a business that has breached its loan covenants to undertake an IBR of the company. In this scenario, an IP can project manage the engagement with a lender and guide directors through the process.
Pre-lend Review
An IP can conduct a pre-lend review for a company seeking to raise capital via debt or equity if the prospective capital provider requires it. An IP has extensive experience preparing lender user-friendly reports that assist lenders in assessing the suitability of businesses as borrowers of lenders’ products.
Stakeholder management
An IP has significant experience assisting companies in managing their relationships with key stakeholders, such as a lender, HMRC, or its largest customer or supplier, where these have become strained. An IP can work with directors to prepare a stakeholder management plan and devise appropriate strategies to help build trust and find opportunities for goal congruence with key stakeholders.
How do I find a licensed insolvency practitioner?
Directors may be recommended to an Insolvency Practitioner by their accountant, solicitor, or other trusted party. While this is useful, directors should be vigilant about the IP they choose to ensure they are licenced and positioned to take on the appointment.
The UK government maintains a searchable database of licenced Insolvency Practitioners based on location, so directors can find a local IP or verify the credentials of a recommended IP
Working with a professional firm of licensed IPs can give your business the best of both worlds. With 14 national locations around the UK, Opus LLP can provide businesses with a local, experienced Insolvency Practitioner who is part of a wider network of expertise.
We understand the need for confidentiality in these situations, and we are available for a free, no-obligation call so you can discuss your situation without judgment and find the best course of action. Contact our Head Office on tel:02039956380 to arrange a call with one of our local Partners today.