Licensed Insolvency Practitioners

What is a Licensed Insolvency Practitioner?

A licensed insolvency practitioner (IP) is a professional authorised and regulated to act on behalf of individuals or businesses in all formal insolvency proceedings. Only licensed insolvency practitioners can legally manage processes such as company liquidation, administration, and voluntary arrangements. Their expertise ensures that all actions taken are fully compliant with UK insolvency law and that creditors’ and directors’ interests are protected throughout the process.

What Does an Insolvency Practitioner Do?

1. Assess Financial Situations

One of the first responsibilities of an insolvency practitioner is to assess the financial condition of the business or individual. This involves a thorough analysis of income, liabilities, assets, cash flow, and the ability to pay debts as they fall due. Based on this assessment, the IP determines whether the entity is legally insolvent and identifies potential routes forward.

2. Offer Advice and Propose Solutions

An insolvency practitioner doesn’t just handle legal procedures; they are also advisers. They provide objective, regulated guidance on the available insolvency and recovery options. For businesses, this may include turnaround strategies, Company Voluntary Arrangements (CVAs), or administration. For individuals, options may involve an Individual Voluntary Arrangement (IVA), bankruptcy, or informal debt management solutions.

3. Appointed Roles

IPs can be appointed to take on several key roles in formal insolvency proceedings:

• Administrator: Takes control of a company to try to save it or achieve a better result for creditors than immediate liquidation.
• Liquidator: Oversees the sale of a company’s assets and distributes the proceeds to creditors.
• Trustee in Bankruptcy: Handles the estate of a bankrupt individual, selling assets and distributing funds to creditors.
• Nominee or Supervisor in an IVA: Helps to create and manage an agreement between the individual and their creditors.

   

Each of these roles requires impartiality, strong financial expertise, and a deep understanding of UK insolvency law.

Types of Insolvency Procedures an IP Can Handle

Corporate Insolvency

Insolvency practitioners play a critical role in managing company insolvency. Key procedures include:

• Administration: Offers legal protection from creditors while a plan is developed to rescue the business, sell it as a going concern, or maximise asset realisation.
• Company Voluntary Arrangement (CVA): Allows a company to negotiate with creditors to pay off debts over time while continuing to trade.
• Creditors’ Voluntary Liquidation (CVL): An orderly winding-up of an insolvent company initiated by the directors and shareholders.
• Compulsory Liquidation: Initiated by creditors through the courts, typically when a company has failed to pay its debts.

   

Personal Insolvency

For individuals, IPs can manage the following procedures:

• Individual Voluntary Arrangement (IVA): A legally binding agreement to repay creditors over an agreed period, often five years.
• Bankruptcy: A formal process where an individual’s assets are sold to repay debts, typically lasting one year.
• Debt Relief Orders (DROs): While IPs don’t administer DROs, they may offer advice on whether this option is suitable for individuals with low income and minimal assets.

Common Myths About Licensed Insolvency Practitioners Dispelled

• Myth: Only insolvent companies need to use licensed insolvency practitioners.
  Fact: Licensed insolvency practitioners also handle solvent company closures and restructuring.

• Myth: Hiring an insolvency practitioner means the end of your business.
  Fact: They can help explore alternatives that may save or restructure your company.

• Myth: Using a licensed insolvency practitioner will damage your personal credit rating.
  Fact: The company is a separate legal entity; personal credit is only affected if you have given personal guarantees.

• Myth: You cannot communicate directly with the insolvency practitioner.
  Fact: Licensed insolvency practitioners work closely with directors and creditors to find the best outcomes.

What Does the Licensed Insolvency Practitioner Process Involve?

If you believe your company needs the support of a licensed insolvency practitioner, we will arrange a confidential meeting to discuss your company’s financial situation and all available options. If formal insolvency action is appropriate, the practitioner will:

• Collect and review company financial information

• Advise on the most suitable insolvency procedure

• Prepare and file necessary documentation

• Notify creditors and arrange creditor meetings

• Manage the process transparently and in compliance with the law

Choosing the right licensed insolvency practitioner is vital to ensure the process is handled professionally and smoothly. Call us on 0800 999 0666 for a free, no obligation discussion.

Can Creditors Claim Retention of Title to Goods?

If your company owes money to suppliers, you should be aware that some creditors may have retention of title clauses. This means they retain ownership of goods supplied until payment is made. In insolvency situations, creditors may seek to recover these goods, which can affect your company’s assets during liquidation or administration.

Licensed insolvency practitioners will carefully review contracts and work to identify any goods subject to retention of title claims, ensuring proper handling during insolvency proceedings.

Will Using a Licensed Insolvency Practitioner Affect My Personal Credit Rating?

Generally, insolvency procedures managed by licensed insolvency practitioners do not impact your personal credit rating because the company is a separate legal entity. However, if you have provided personal guarantees for company debts, you may be personally liable, and this can affect your credit rating.

It is important to understand the terms of any personal guarantees and seek professional advice to protect your personal financial position. Our licensed insolvency practitioners can guide you through these complexities and help manage creditor relationships to minimise personal risk.