What is an insolvency practitioner?

What is an insolvency practitioner?

When a business faces difficulty then there are number of people that are involved with the process but perhaps the most key is the Insolvency Practitioner (IP). These professionals will be appointed by the court during the process, but what exactly is an insolvency practitioner?

The first thing to note is that there are strict rules regarding insolvency practice in the UK. This is to stop the unsavoury practices of years gone by when unqualified (and often unscrupulous) individuals would operate in the field of insolvency.

Today, if someone wants to work as an IP they must be appointed and authorised by the Secretary of State for Trade and Industry or belong to one of the Recognised Professional Bodies (RPBs).

Currently the bodies in the UK are;

The Law Society of England and Wales

The Law Society of Scotland

The Law Society of Northern Ireland

The Institute of Chartered Accountants in England and Wales (ICAEW)

The Institute of Chartered Accountants in Scotland

The Institute of Chartered Accountants in Northern Ireland

Association of Chartered Certified Accountants (ACCA)

The Insolvency Service (BIS)

The Insolvency Practitioners Association (IPA)

The IP will be required to abide by the conditions of the Statements of Insolvency Practice (SIPs). This is a code of conduct that aims to ensure that not only do all insolvency proceedings run along standard lines but also that they are conducted in accordance with best practice.

Typically the person wishing to be registered will be a professional person such as a lawyer or accountant who has completed extra training and examinations to allow them to carry out insolvency work or in the case of an IPA will be a person trained specifically in insolvency practice who has undertaken the necessary training and examinations to prove their competency.

In all these cases the Insolvency Practitioner will be bound by a series of regulations and requirements that, if breached, could result in them losing their accreditation and therefore their ability to work in the field.

IPs are also required to abide by Ethical Codes set out by their authorising bodies which codify the behavioural standards expected of members of the association, be they lawyers, accountants or IPs. These standards will be updated with best practice to ensure that the practice of insolvency remains current despite a changing business landscape.

It should be noted that a layman cannot act in an insolvency and acting as an insolvency office holder in this case would be an offence under the insolvency act 1986.

An Insolvency practitioner can be charged with a number of tasks within the field. These can be either on behalf of companies, partnerships or individuals.

In terms of individuals these can be;

An Administrator of a deceased insolvent estate

A Trustee under a trust deed

A Trustee in a sequestration

A Trustee under a deed or arrangement

A Nominee or supervisor of a Voluntary Arrangement

A Receiver of property

A Trustee in bankruptcy.

For a company or partnership an IP may be;

A Liquidator

An Administrator

An Administrative Receiver

A Nominee or supervisor of a Voluntary Arrangement

A Trustee of a partnership.

Often an Authorising body will issue guidance and bulletins to its members that they should take note of when holding office. They will also be required to undertake Continuing Professional Development (CPD) to ensure that their knowledge is kept up to date and current and this will often be assessed by the body to ensure that Is of sufficient quality to comply with their rules.

many businesses working in the field won’t actually be registered IPs but will actually be brokers concerned with marketing insolvency services. This means that they gather leads and then pass them on to the actual IP firm that will be doing the work. Whilst you may think that initially you are speaking with an insolvency practitioner, in fact you’ll be speaking with someone who will possibly gather some basic information and then use that to sell the lead on to the highest bidder.

Therefore the best advices is that it is always worth checking that the company that you are considering using is actually licenced for insolvency work rather than just a marketing operation.

Insolvency and Liquidation proceedings are a technically complex area and each case has its own peculiarities that require careful consideration. The regulations around the licencing of individuals to become an IP are designed to ensure that people who wish to enter the field are not only technically competent but also will adhere to the highest standards of ethics and professionalism.

Who gets paid in a liquidation?

 

 

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