What is an insolvency practitioner (IP)?
An insolvency practitioner is a licenced individual who is hired by businesses to help with insolvency proceedings, including liquidation and bankruptcy.
Regularly monitoring your income and debts can help keep your business out of financial trouble. The profit and loss statement can help you keep track of your income and expenses, and give you an overview of your business position.
Most IPs are accountants or individuals working for accounting firms. In the UK, all insolvency practitioners must have specific qualifications, including passing arduous insolvency examinations (JIEB). IPs must always follow the law and are closely monitored by regulators.
What are the duties of an insolvency practitioner?
Put simply, insolvency practitioners provide advice and assistance to financially distressed, insolvent, or bankrupt individuals and businesses.
The main duties of an IP involve advising directors and stakeholders, negotiating with creditors, and arranging for the valuation and disbursement of assets. We’ll explain the duties of an IP in more detail below.
Provide advice and guidance
The main goal of an insolvency practitioner is to provide advice to stakeholders and directors according to UK law. This can include a wide range of topics depending on the financial situation of the business.
IPs are highly trained professionals who are knowledgeable about accounting practices, UK law, negotiations, liquidation, bankruptcy, insolvency, and voluntary liquidation. They can advise and help you carry out any of these processes.
Liquidate assets according to UK law
If a company becomes insolvent, under UK law, it will need to act in the best interest of its creditors. In other words, if a business can no longer pay its debts, its assets should be distributed among the entities that the business owes money to.
An insolvency practitioner can advise a business if they should stop trading and liquidate their assets, or if there are any alternatives that will keep the business running.
Assets can be any item of value owned by the company, including machinery, property, vehicles, patents, etc. An IP is involved in valuing the assets, selling items, and distributing funds to creditors.
Any cash left over after the creditors have been repaid will be distributed to shareholders.
Assist with closing the company
When a business is closing due to financial difficulties, there is a lot that needs to be done beyond distributing assets. An insolvency practitioner can also help businesses with any outstanding company matters.
This may include informing Companies House of the closure, ensuring that staff are paid their final salaries, advertising the liquidation in your local Gazette, and preparing your important financial records.
How do I find an insolvency practitioner?
It is important to find a licenced insolvency practitioner, rather than an unlicensed insolvency advisor. Unlicenced advisors are limited in what they can offer, and it is possible that you could receive incorrect advice. You can find a list of licenced IPs in your area from the UK Government website.
How much does an insolvency practitioner cost?
The cost of an insolvency practitioner’s services can vary greatly depending on the financial state and size of your business, and what you will require from them.
If you are just looking for advice, you can expect to pay the same as you would for legal or accounting advice. If you need to appoint an insolvency practitioner to liquidate your assets and assist you in shutting down your business, you can expect to pay at least a few thousand pounds.