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What is an Insolvency Practitioner?

Published on 24th October 2018 - Last update on 25th October 2018

Running a business is a full-time responsibility where you simply can’t afford to drop your guard. Yet, no matter your size or sector, you’re certain to encounter any number of challenges at some point in your business’ development. But rather than getting yourself into a panic, what you need to do is identify the source of the issue, decide on an appropriate course of action and act fast. However, overcoming these challenges isn’t always a straightforward matter and they may sometimes only reveal themselves at an advanced stage.

As a result, managing your finances effectively to keep up with your obligations as and when they’re due could become untenable. Should this continue with your business losing money, it could result in it becoming insolvent and/or you and any associated directors filing for bankruptcy. If such an event was to occur, an Insolvency Practitioner (or administrator) would be appointed to your business within 2 weeks of filing an application. Therefore, it’s vital that you understand what an Insolvency Practitioner is and where you and your business stand.

What is an Insolvency Practitioner?

If you’ve filed for Insolvency or Bankruptcy, an Insolvency Practitioner (IP) will be appointed to oversee your business and act as a Trustee in order to help creditors regain the money that they are owed. As such, an Insolvency Practitioner is a licensed individual with the authority to intervene in cases where either an individual, partnership or company has become insolvent in order to release equity held within your unencumbered assets (e.g. equipment, machinery, vehicles and property). Plus, it’s worth noting that, most of the time, Insolvency Practitioners are also accountants working within an accountancy firm.

Having trouble keeping up with your financial obligations? Need access to additional funds, and fast? Apply for Working Capital Finance or learn more about how your business could benefit.

How do Insolvency Practitioners work?

Should an Insolvency Practitioner be appointed, they’ll have to act a Trustee and take control over your business. At the start of this process, they’ll set about creating a viable plan for both supporting your business and resolving the debts owed to creditors. However, this will need to be presented to a creditor and can only be enacted if at least 75% of the creditors agree. If this isn’t possible, the Insolvency Practitioner will, instead, liquidate your business, which could involve:

  • Selling your business and/or personal unencumbered assets in order to use the proceeds to settle your debts
  • Collecting the money owed to you or your business in order to repay your creditors
  • Setting down terms and conditions whilst acknowledging the claims of each your creditors
  • Distributing and creating a repayment order (which creditors get paid first and how much they each receive).

However, although this is a situation you want to avoid, filing for insolvency does offer you one benefit. Once registered as insolvent, your creditors cannot take out any legal action against your business or push for compulsory liquidation - unless they’ve received permission from a court. As such, this means that your creditors have to negotiate a viable plan. But, that doesn’t guarantee that you’ll always get a favourable result which avoids liquidating your business.

How are Insolvency Practitioners regulated?

For an Insolvency Practitioner to operate and get involved with your business, they must possess a license. In addition, they should also have:

  • Completed and successfully passed an Insolvency Examination (JIEB Exams)
  • Sufficient experience in the insolvency process
  • Be able to meet the demands of a regulator (e.g. ICAEW and ICPA) and demonstrate, on demand, that they’re suitably qualified to perform the duties of an Insolvency Practitioner.  

In addition, if you do have an Insolvency Practitioner attending to your business but have concerns about their conduct, you can launch a complaint with a regulatory body by completing an online government form.

How can I support my business and avoid becoming insolvent?

Developing your an idea into a thriving business venture takes many hours of hard work and dedication, which is why it’s absolutely soul crushing to see it go into administration. However, it doesn’t need to end this way. But by exercising constant vigilance and reviewing your business practices on a regular basis, you could identify potential issues before they have the chance to escalate.

One of the most common reasons for any business entering administration is a lack of sufficient capital, which could be due to factors such as a sustained period of uneven cash flow, unexpected payment demands or even a natural disaster. Yet, no matter what it may be, you could raise the funds you need to support your business by applying for Working Capital Finance, giving your business access to products such as Invoice Finance, Merchant Cash Advance (MCA), Asset Refinance and Overdraft Replacement. Plus, depending on the product and the complexity of the request, you could receive funding as little as 48 hours. All you need to is to source the most suitable finance agreement.

Need help sourcing the right finance for your business?

Insolvency is something that every business owner dreads. But sometimes, through no fault of your own, you run into situations that threaten the long-term sustainability of your business. As such, it is during these periods that you need to act quickly and decisively. That is why, rather than running the risk of insolvency, more and more business owners are requesting the support of Working Capital Finance. Providing access to a wide range of business finance solutions, it can support your business until it finds its feet again.

At Rangewell, we’re an Access to Finance specialist and have mapped over 400 lenders to offer you a comprehensive overview of more than 23,000 business finance products. Our services are free to use to business owners and their advisors, and we’ll also guide you through the application process. So if you're looking to gain access to additional funds and avoid the risk of insolvency, apply for Working Capital Finance today or find out more with Rangewell.


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