Many company directors will seek help from an insolvency practitioner at one point or another. They might need advice on how to restructure their company to improve profitability, help with selling their company using methods such as a pre-pack administration, or help to liquidate their company when it needs to be closed down.
In this article, Clarke Bell will discuss the duties of an insolvency practitioner, their roles, and what they can do for you and your company.
Duties of an Insolvency Practitioner
An insolvency practitioner performs a wide range of duties. Those duties vary depending on the type of procedure they are dealing with and include:
- Offering advice to company directors to identify the best solutions to their company’s problems, including insolvency procedures and other potential routes.
- Carrying out formal procedures on behalf of company directors. This includes Creditors’ Voluntary Liquidation (CVL), Members’ Voluntary Liquidation (MVL), and other insolvency procedures. Insolvency practitioners will be responsible for realising company assets and distributing proceeds amongst creditors and shareholders, in addition to other responsibilities.
- Investigating the conduct of directors and assessing company affairs as part of certain procedures. These investigations are conducted with a view to ensuring no misconduct has occurred. Insolvency practitioners will then file a report with the Insolvency Service declaring their findings.
- Drafting reports regarding the progress of procedures and supplying them to creditors at regular intervals. Insolvency practitioners will also keep company directors apprised of the procedure’s progress.
- Communicating with creditors and negotiating new terms for loan agreements. This is predominantly done during a Creditors’ Voluntary Arrangement (CVA).
- Assisting with the documentation and legal processes appropriate to the task at hand.
What roles can an insolvency practitioner occupy?
An insolvency practitioner can occupy a wide range of roles depending on a company’s needs and its directors’ wishes. Insolvency practitioners will then perform some or most of the aforementioned duties, depending on which role they have taken up. Roles an insolvency practitioner can occupy include:
One of the main roles insolvency practitioners fill is that of a liquidator. This is done when company directors close down their company, either because they wish to extract retained profits and move on, or the company’s debts have become unmanageable. Insolvency practitioners will then carry out a Members’ Voluntary Liquidation or a Creditors’ Voluntary Liquidation, respectively.
Regardless of the type of liquidation they perform, insolvency practitioners will be responsible for raising capital through the liquidation of company assets and accounts. Once the company has had its assets liquidated, the insolvency practitioner will then proceed to close it down, removing it from the Companies House register. Whether the proceeds of the liquidation are distributed predominantly amongst creditors or shareholders depends on the type of liquidation, with an MVL being used for solvent companies, and a CVL for insolvent ones.
Occasionally, a company’s directors will allow their financial situation to spiral out of control, resulting in the courts issuing their company with a compulsory liquidation. In such cases, the courts will appoint an insolvency practitioner to fill the role of a provisional liquidator, one that specialises in the compulsory liquidation of insolvent companies. Insolvency practitioners acting as provisional liquidators will realise company assets just as they would any other liquidation, but also have the added responsibility of ensuring the assets remain within the company. Moreover, the insolvency practitioner will investigate company affairs and director conduct, with the aim of searching for fraud or misconduct. A report will be made regarding the findings and sent to the Insolvency Service, and the company will be wound up and removed from the Companies House register.
Company Voluntary Arrangement
For company directors who would prefer to keep their company in operation, but want a solution to their debt issues, then an insolvency practitioner can assist with a Company Voluntary Arrangement (CVA). The insolvency practitioner will negotiate with creditors to agree upon new terms for debt repayment. This allows companies to stay in operation, while still satisfying the needs of outstanding creditors without having to resort to company liquidation.
For company directors who wish to place their company into administration, their appointed insolvency practitioner will take the role of administrator. In this role, the insolvency practitioner will assume control over much of the company, dealing with many of the usual operations. Additionally, the insolvency practitioner will liaise with company creditors to keep them up-to-date with the process, showing them how the current administration will be more to their benefit than a liquidation would. Essentially, this is a business rescue plan, which should bring the company back on track.
However, this is not always the case. Sometimes, it is in the best interests of the current directors to sell the business and its assets to raise enough capital to repay outstanding creditors. In such cases, an insolvency practitioner will organise a pre-pack administration, allowing directors to purchase the business, its assets, or both in order to pay back the company’s creditors. A third party could also offer to purchase the business and its assets, with the sale also going to repay creditors. This method is not always the one settled on, however, as the administrator must be convinced that this is the best path forward for the business’s outstanding creditors.
Let Clarke Bell help you
Clarke Bell have been trading for more than 28 years. In that time, we have helped thousands of directors who had a struggling company to find the best solution to their financial problems. We have also placed more than 4,000 solvent companies through the Members’ Voluntary Liquidation process.
We have a wealth of experience and expertise. Our team is professional and friendly. And our fees are affordable.
Contact us today for a free, no-obligation consultation, and see how we can help you.