Why Appoint an Insolvency Practitioner?

If you are insolvent the court may choose to appoint an insolvency practitioner to deal with your case rather than grant bankruptcy. You can approach an insolvency practitioner directly yourself, but you need to make sure that they are qualified and take on clients.

As a general rule, insolvency practitioners are qualified accountants or even solicitors but since the rules were changed in the mid nineteen eighties it is possible to become a practitioner by passing several exams. Once qualified they are subject to the control of the governing body, the Secretary of State for Business, Enterprise and Regulatory Reform, namely the BERR. To date there are around 1,500 qualified and regulated Insolvency practitioners operating in the UK.

An insolvency practitioner primarily deals with the following scenarios:

• Liquidation
• Bankruptcy
• Deeds of Arrangement
• IVA's (Individual Voluntary Arrangements)
• CVA's (Company Voluntary Arrangements)
• Administrative Receiverships
• Administrations

They also deal with Trust Deeds in Scotland as the laws are slightly different there, as are the regulations surrounding bankruptcy.

When to use an IP

Under normal circumstances an Insolvency practitioner deals with cases of IVA's by advising people who have serious money problems on the best course of action. They will deal with the creditors directly, thus removing the pressure of threatening phone calls and financial uncertainty. Their aim is to help their clients to become debt free, pay off creditors and if possible, avoid bankruptcy.

Apart from dealing with individual cases an insolvency practitioner can be appointed by the court to carry out the winding up of a company. These are referred to as 'Official Receivers' but they are regulated by the Insolvency service. You will be interviewed and they will take over control of your company.

If the official receiver discovers that a large amount of money is owed they will then call in the Insolvency Practitioner, appoint them as liquidator or trustee and wind up the company as required.

Insolvency practitioners are paid out of money recovered during the winding up of the company and as such are able to decline the appointment if they feel there is not enough money in the assets to pay them. Under these circumstances the official receiver must continue to handle the case.

However, if a company is liquidating on a voluntary basis then an Insolvency Practitioner will always be appointed as the liquidator. This is also the case where the company is liquidating but is still solvent. They will be appointed by the members of the board. It is worth noting that if it is a creditor voluntary liquidation the insolvency practitioner will be appointed by them also. In all other cases it will fall to either the official receiver or the courts directly to appoint them.

Beware!

It is worth noting that Insolvency Practitioners charge high fees, some up to £600 a hour for company insolvency and there is a call for the government to regulate the service further. Some liquidation's by the Insolvency service have taken years to finalise, with the fees running into hundreds of thousands, as with the Robert Maxwell case where the insolvency practitioner is reputed to have claimed over £92million in fees. The case is still not settled.