What is a Licensed Insolvency Practitioner and What are Their Duties?

What is a Licensed insolvency practitioner?

 

A Licensed insolvency practitioner – is someone who is licensed to act on behalf of companies and individuals when they are facing insolvency or acute financial distress. A licensed Insolvency Practitioner is also able to help directors of solvent companies who have chosen to liquidate their company by way of a Members’ Voluntary Liquidation (MVL) in order to extract held profits.

 

In the majority of cases, a company director will voluntarily approach a licensed Insolvency Practitioner and enlist their help in dealing with their distressed company. 

 

Duties of a Licensed Insolvency Practitioner

 

While a Licensed Insolvency Practitioner will, generally, be instructed by the directors seeking company insolvency advice or by a debtor, they have a rapidly changing role. In all cases, they will usually start out by advising the board, moving to the point where they are overseeing the balance of interests of both parties. They can then rapidly move to act solely for the creditors in instances of terminal company insolvency.

 

The overall overriding duty, no matter what role they are undertaking, is to maximise the return for creditors. This can include realising assets, collecting contributions and often uncovering hidden assets, effectively lifting the corporate veil where necessary.

 

Licensed insolvency practitioners are brought in to resolve complex situations. Company insolvency is complicated, and, therefore, insolvency practitioners act in accordance with the rules set out in Insolvency Law.

 

As mentioned above, the challenges for an insolvency practitioner can vary depending on the situation, but can include:

• Dealing with and potentially directly running any type of business
• Piecing together what went wrong in the company and reporting this to creditors
• Taking steps to preserve jobs and rescue corporations where possible
• Dealing with complex legal claims where there are parties whose actions contributed to the company's insolvency
• Acting as a negotiating intermediary between debtors and creditors to find suitable repayment solutions to avoid insolvency

 

It is also not possible to enter into the following procedures without involvement from a licensed insolvency practitioner, or the official receiver, at the insolvency service overseeing the matter:

• Creditors Voluntary Liquidation
• Members Voluntary Liquidation
• Compulsory Liquidation
• Administration
• Individual Voluntary Arrangement
• Company Voluntary Arrangement
• Bankruptcy