Businesses will, unfortunately, frequently find themselves in need of an insolvency practitioner. In many cases, these circumstances will be far from favorable. Often, they involve serious financial hardship. Therefore, it can really help to understand the process in more detail. This way you can judge whether your business is insolvent in the first place or, whether you might face personal liability. With that in mind, let’s explore an important area when it comes to insolvency - the duties of an insolvency practitioner.
It’s important to understand that insolvency practitioners operate in a broader legal framework. This controls how insolvency processes are carried out. They’re broadly regulated by the Insolvency Service, but must also be members of a Recognised Professional Body (RPB) as well.
These bodies set their own internal professional standards. There are two in England, the Insolvency Practitioners Association (ICA) and the Institute of Chartered Accountants in England and Wales (ICAEW). Individual insolvency practitioners who are members of one of these RPBs will then generally operate through their own businesses such as Chamberlain & Co.
Let’s take a closer look at the specific duties of insolvency practitioners, throughout the insolvency process.
In situations where they’re needed, an insolvency practitioner will typically be appointed by a company’s directors or creditors. However, they may also be appointed by a court. Once they’ve been appointed, they will face certain duties when it comes to taking the business in question through insolvency proceedings and, in many cases, liquidation.
Early on, the insolvency practitioner will likely be faced with the task of assessing the company’s financial health. They will often need to assess whether there’s a genuine possibility that, with the right direction, the business will be able to return to a profitable state of being, or if it needs to be wound up.
If the company cannot be returned to a state of financial or regulatory well-being, then the insolvency practitioner will need to go about liquidating the business. This will consist of selling off the assets. Then, they will distribute the proceeds to creditors in legal order of priority. If there are any remaining assets or funds (which is unlikely in cases of insolvency,) then these will be distributed to any remaining parties as appropriate.
Throughout this entire process, the insolvency practitioner will need to check whether there is any evidence of misconduct in the company. This will likely include checking over company records, to see if anything has been obscured or carried out illegally. In certain cases, they may be required to hand the investigation over, to another investigatory organization.
Hopefully, this article has you feeling a little more informed about the insolvency process. It’s never a nice situation to find yourself in. Furthermore, insolvency can be incredibly stressful for a whole range of reasons. It’s important that you don’t make the situation worse than it already is. Hence, the need for the right support. In most cases, this will necessitate getting assistance from a qualified insolvency practitioner, who will take on many of the duties listed above.
