What is an insolvency practitioner?
An insolvency practitioner, or IP for short, is someone appointed to take responsibility for the financial affairs of an insolvent company or individual. A key part of an insolvency practitioner's role is to make sure that an insolvent company or individual pays back as much of their debts as possible to their creditors. Except in extremely rare cases, an insolvency practitioner is responsible to all of the creditors involved as a whole: they are not responsible to the insolvent company or individual, or to just one creditor.
You might hear insolvency practitioners referred to in a number of different ways. They are known as liquidators in liquidations, administrators in administrations, administrative receivers in administrative receiverships, nominees or supervisors in Company Voluntary Arrangements or Individual Voluntary Arrangements, or trustees in bankruptcies.
Apart from the government's Official Receiver, only licensed insolvency practitioners are allowed to oversee UK insolvency procedures. Insolvency practitioners are licensed and regulated, and their fees are agreed with creditors or the courts. Insolvency practitioners' reports about their cases are filed with Companies House and are publicly available.
An insolvency practitioner's decisions about what to do with an insolvent company or individual will be based on what process results in the best return for creditors. With a company, for example, an insolvency practitioner may continue to trade the company while looking for a buyer or new investor, they might decide to simply cease operations and sell the assets of the company to realise money to pay back creditors, or they may help the company come to an agreement with creditors to restructure their debts. When working with an insolvent individual, an insolvency practitioner may sell assets to realise money to repay creditors, or they may help the individual restructure their debts.
Insolvency practitioners have a number of powers available to them to track down missing assets, reverse pre-insolvency transactions, and investigate wrongdoing by individuals and company directors.
Insolvency practitioners don't just support companies and individuals in insolvency. They can provide advice and support outside of insolvency procedures, too.
On 1 January 2019, there were 1,565 licensed insolvency practitioners working in the UK. Insolvency practitioners typically have backgrounds in accountancy, the law or restructuring. To obtain a licence, insolvency practitioners must first pass a set of demanding exams called the Joint Insolvency Examination Board exams, and will be required by their regulator to have a certain level of insolvency experience. You can find an insolvency practitioner near you on our website here.
Insolvency practitioners can obtain licences which allow them to oversee both corporate and individual insolvency procedures, just individual insolvency procedures, or just corporate insolvency procedures.
How are insolvency practitioners regulated?
To act as an insolvency practitioner, individuals need an insolvency licence. These are issued, on an annual basis, by a regulator - known in insolvency as a Recognised Professional Body, or RPB for short. These RPBs monitor an insolvency practitioner's work, and ensure that they are complying with their statutory duties and that they are reaching the high professional standards expected of them. This monitoring involves regular visits to practices and a requirement that regular reports are filed with the RPB. Insolvency practitioners face a number of regulatory sanctions for compliance failures, including reprimands, fines, and the revocation of their licence (and therefore their ability to practice). These sanctions are published by the RPBs.
There are four RPBs in the UK:
- Chartered Accountants Ireland (CAI)
- the Insolvency Practitioners Association (IPA)
- the Institute of Chartered Accountants in England and Wales (ICAEW) and
- the Institute of Chartered Accountants of Scotland (ICAS)
The work of these RPBs is overseen by the government's Insolvency Service. The Insolvency Service may also apply sanctions to an insolvency practitioner directly. The Insolvency Service produces annual reports and statistics on insolvency regulation.
Insolvency practitioners' actions are governed by a number of pieces of legislation and regulation. Key documents include the Insolvency Act 1986, the Insolvency Rules 2016, the Insolvency Code of Ethics, and what are known as 'Statements of Insolvency Practice' or SIPs. These SIPs set out what insolvency practitioners are required to do in a number of different situations, from agreeing fees, reporting on director conduct, working with creditors, to handling 'pre-pack' administrations.
Regulation for insolvency practitioners is set by the Insolvency Service. A body known as the Joint Insolvency Committee (JIC) is responsible for further developing and maintaining insolvency standards from a regulatory, ethical, and best practice perspective. JIC promotes consistency across the profession and has responsibility for the development of the Code of Ethics, the SIPs, and insolvency guidance papers. JIC includes representatives from the regulators, government, and other business bodies.
Any complaints about the work of an insolvency practitioner should be made via the Insolvency Complaints Gateway. This gateway ensures that complaints will be investigated by the right RPB.
R3 members can provide advice on a range of business and personal finance issues. To find an R3 member who can help you, click below.