The Role of a Licensed Insolvency Practitioner during Company Insolvency Procedures
An Insolvency Practitioner’s initial aim will be to rescue a company from liquidation and subsequent closure. If this proves impossible, their role will be to realise the highest return for creditors by selling company assets.
An IP will scrutinise the workings and performance of the company in an attempt to turn the business around, or rescue it through restructuring. A sale of assets may take place, providing a cash injection and potential streamlining of business operations. Additionally, the their role is to negotiate with creditors to obtain extended payment terms for the company.
One of the challenges they face is balancing the needs of the company and its creditors. The existence of competing interests is clear, but the IP’s obligation in all cases is to keep creditor interests to the fore, and maximise their returns.
Begbies Traynor has vast experience of business rescue and can offer a same-day consultation from offices around the UK.
What options does an IP have when appointed?
A range of options usually present themselves on appointment, but in general terms an IP will use their sound commercial judgement to decide on the best course of action.
This may include:
- Taking over control of the company for a period in order to turn its fortunes around.
- Negotiating with creditors for extended payment terms that allow the company to continue trading, so providing an opportunity to improve the situation of both company and creditors.
- Selling the underlying business as a going concern to a third party, or as is common, to the existing directors.
- Closing down the company and liquidating its assets.
Closure is a last resort, and if the business is deemed to be fundamentally viable, the focus will be on rescuing the company and saving jobs without compromising the creditors’ position.
What are the main duties of a licensed Insolvency Practitioner?
During company insolvency procedures, an IP will look at all the options available to the directors and provide professional advice on the best course of action. As described above, this could range from rescue to closure of the company, depending on each situation.
Negotiating with HMRC and other creditors is a valuable part of an IP’s duties. Their influence and presence as a professional intermediary in proceedings tends to instil greater confidence in creditors, and can gain their trust.
A licensed Insolvency Practitioner will sell company assets to realise money for creditors, subsequently collecting in and distributing funds to creditor groups in accordance with legislation. An IP is also responsible for the inspection and agreement of creditor claims, once funds are known to be available, and for sending a report to the Secretary of State on the conduct of directors during the time leading up to insolvency.
In the case of voluntary liquidation, an IP will assist the directors to meet legal obligations, including the arrangement of creditor and shareholder meetings, and the supervision of the liquidation process.
In all roles, the Insolvency Practitioner is required to abide by a code of conduct produced by the Insolvency Service, providing professional and ethical guidance.
Begbies Traynor is the largest business recovery practice in the UK, and is available for appointment. We have an extensive UK office network, and offer a free initial consultation.