Should I Speak To An Insolvency Practitioner or an Insolvency Solicitor?

April 21, 2023 / Business Insolvency

If your company is in debt, enough to warrant considering the use of insolvency procedures, one of the first questions on your mind is likely to be: who should you speak to for help? 

Insolvency is a difficult time in any director’s career, one made all the more challenging without professional advice to rely on. However, if you are in such a situation, you have likely encountered two similar, but different, professions – insolvency practitioners and insolvency solicitors.

Although these professions might look the same at first glance, the services and advice they offer are different. Approaching the wrong one for your situation can cost you time. And, in situations involving insolvency, time is a precious resource that should not be wasted.

In this article, Clarke Bell will discuss the difference between an insolvency practitioner and an insolvency solicitor. We will give you the information you need to get the right advice for you and your company.

What is an insolvency solicitor?

Insolvency solicitors specialise in providing legal advice for insolvency-related affairs. They can offer professional advice for both the directors of an insolvent company and outstanding creditors. They can also provide legal representation for parties involved in a dispute related to insolvency.

In practice, an insolvency solicitor could perform a range of duties in their role, including advising a company’s directors on how to navigate threats of disqualification, advising directors who intend to open a new company after liquidation, or handling claims made against an insolvent company. In short, the role of an insolvency solicitor is strictly legal in nature.

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What is an insolvency practitioner?

The role of an insolvency practitioner is quite different. While certainly knowledgeable of the legality surrounding insolvency and insolvency procedures, they do not provide legal counsel or representation. Instead, an insolvency practitioner will work with directors of insolvent companies to find the best insolvency procedure to solve their problems, then work to implement it. For example, an insolvency practitioner might identify a Creditors’ Voluntary Liquidation (CVL) as the best solution to an insolvent company’s spiralling debt. If the directors approve, the insolvency practitioner will carry out the procedure.

{An insolvency practitioner can also help directors of solvent companies, when they are looking to close down a company which has no debts, using the very tax-effective Members’ Voluntary Liquidation (MVL) process.}

An insolvency practitioner is typically more involved in the practical side of things compared to an insolvency solicitor. They might fill the role of liquidator, administrator, or act more as a negotiator, depending on which insolvency procedure is in use. However, insolvency practitioners can also work in an advisory role, assessing a company’s situation and advising its directors on the best solutions available.

Also Read: How To Find The Best Insolvency Practitioner

What insolvency procedures can an insolvency practitioner carry out?

As we have mentioned, insolvency practitioners can carry out a wide variety of duties depending on the insolvency procedure in use. They might take a more hands-on role in some procedures, taking control of the company and winding it up themselves. For other procedures, they might take on a more advisory role. Let’s consider some procedures in more detail for a better look at the responsibilities of insolvency practitioners.

Creditors’ Voluntary Liquidation

One of the more common procedures an insolvency practitioner will carry out is a CVL. This procedure is solely for insolvent companies, and is an extremely useful method of dealing with otherwise unmanageable company debt. 

A CVL affords directors multiple key benefits, the first of which is the appointment of an insolvency practitioner of their choice. This allows directors to select an insolvency practitioner they know to be reliable, or within their price range, and appoint them to the role of liquidator. In this role, the insolvency practitioner will be more hands-on than in others. They will take the reins of the company, with the directors essentially relinquishing control for the duration of the procedure. Once in control, the insolvency practitioner will first identify the company’s assets and accounts, recording each asset’s value. These assets will then be disposed of, with any proceeds going to repaying outstanding creditors and covering any other liabilities. 

The insolvency practitioner will also be in contact with creditors during this time, keeping them up to date with the procedure’s progress. Once all payments have been made, the company will be wound up and removed from the Companies House register. At this point, it will cease to exist as a commercial entity.

Company Voluntary Arrangement

Under a Company Voluntary Arrangement (CVA), an insolvency practitioner will take on a different role. If the company in question has a solid business model, enough that recovery is possible, an insolvency practitioner might suggest this procedure as the best solution.

With a CVA, the goal is to essentially renegotiate the loan agreements between a company and its creditors. This is done to reduce the financial strain faced by the struggling company, while aiming to ensure its creditors receive what they are owed in full. In the end, both parties will benefit; creditors are repaid, and the company can continue operating.

This negotiation is handled by the insolvency practitioner. They will act as a mediator, bringing directors and creditors together amicably, with a view to getting both parties to agree on a solution that benefits everyone.

Which of the two should I speak with?

The answer to this question depends on what your situation requires. 

If you require legal representation regarding insolvency, then an insolvency solicitor will be able to meet your needs. However, if you require advice on how to handle your insolvent company’s debt, or the implementation of an insolvency procedure, then you should contact an insolvency practitioner instead.

Clarke Bell can help you

If your company is insolvent, and you want help on the best way to deal with it, give us a call.

We have more than 28 years of experience in helping companies find the best solutions to their debt problems. We can do the same for you. 

Contact us today for a free, no-obligation consultation to find out how we can help you to get rid of the stress involved in running company that is insolvent.