Insolvency Exams – Advice and Information
1 – What is an Insolvency Practitioner?
An insolvency practitioner (or an ‘IP’) is an individual who is licensed and authorised to act in relation to the affairs of an insolvent individual, partnership or company.
The definition of insolvency is being ‘unable to pay debts as and when they fall due’ (see here for further information).
What is the function of an IP?
IPs are appointed to sort out difficult situations; where either an individual or a business is insolvent or is likely to become insolvent. Initially, their main task is to attempt to ‘rescue’ the situation.
If it is not possible, the IP aims to:
- realise the assets of the person or company who is insolvent;
- collect monies due to the person or company;
- agree the claims of creditors; and
- make distributions these monies after paying for the costs involved in realisation.
Where does the work come from?
An IP may be contacted directly by the directors of a struggling business or an individual who is in debt. IPs also carry out work passed over by the government (the Official Receiver). They may also be contacted by a third party – a creditor (who cannot retrieve their money), an accountant (for one of their clients); or an entity or individual who has a financial interest (for example, a bank or an investor). Often the IP will suggest an initial meeting to discuss the facts of the case.
What happens at the first meeting?
The IP will examine and comment upon the financial position of the business or the individual to establish the level of insolvency and circumstances of the case. They will then provide an explanation of the options available and recommend a course of action.
Why must an IP be contacted?
With accountancy skills and knowledge of insolvency law the IP will draw on a broad range of industry experience to provide the best possible advice. They are regulated and therefore authorised to provide the most appropriate advice for a given situation.
The advice offered by the IP will not always lead to a formal insolvency procedure. Insolvency
professionals will always look at practical alternatives to formal procedures. It may be that the costs involved with a formal procedure can be avoided.
Does an IP deal purely with insolvent matters?
Insolvency practitioners possess a broad range of debt restructuring knowledge, practical skills and useful contacts. IPs often act as turnaround professionals or company doctors too. They are often best placed to offer advice to individuals and companies where they may be an impending threat of insolvency in the near future. Such advice helps the individual or company implement vital safety measures just in case of a ‘worst case’ scenario.
Does an IP ever advise solvent clients?
Insolvency practitioners are often called to look at solvent companies, either for restructuring or for solvent winding up. A solvent company might be wound up because, for example, it has reached the end of it’s corporate life, it has fulfilled it’s purpose or the shareholders simply wish to retire.
Is it possible to specialise in one of these areas?
An IP might specialise in personal or corporate insolvency (or solvent restructuring/winding up) although the majority will be able to give valuable practical & legal advice across all fields.
How popular is the insolvency profession?
In terms of the actual number of IPs, the profession is relatively small. There are just over 2,000 IPs throughout the UK.
What is required to act as an insolvency practitioner?
If you want to become a licensed insolvency practitioner you must:
- be approved as a fit and proper person by the Insolvency Licensing Committee
- be licensed by one of the Recognised Professional Bodies
- pass the Joint Insolvency Examination Board’s exams (JIEB exams )
Insolvency law is frequently updated for the purposes of improvement, modernisation and to encompass our advancing technology. There is also a broad range of industries an IP will encounter during his working life. For these reasons, an IP must maintain their professional education, even after qualifying, to the standards required by their governing body. This is to ensure they are suitably equipped with the necessary practical skills, industry knowledge and legal expertise to tackle the most complex of crises in our ever-evolving economy.Source: insolvencyexams.co.uk