Insolvency practitioner vs the Insolvency Service: who does what

A licensed insolvency practitioner is a private professional you can appoint. The Insolvency Service is a government agency that regulates the profession, investigates directors and, through the Official Receiver, runs liquidations that creditors force through the court. You choose the first. The second is chosen for you.

Licensed insolvency practitioners

An insolvency practitioner (IP) is an individual, usually an accountant or solicitor by background, licensed by one of the recognised professional bodies (ICAEW, the Insolvency Practitioners Association, ICAS or Chartered Accountants Ireland) under the Insolvency Act 1986. Only a licensed IP can act as liquidator, administrator or supervisor of a company voluntary arrangement. They work in firms ranging from sole practitioners to national practices, and they are paid from the insolvent estate or, where there is nothing, by the directors.

An IP has two distinct phases in your situation.

Before appointment they advise. The first conversation is normally free. They look at the company’s position, tell you which route fits, quote for it, and discuss your personal exposure: the loan account, guarantees, any transactions that will be examined. This conversation is confidential and you are under no obligation.

After appointment they are an officer of the court with duties to the creditors as a whole. They sell the assets, agree claims, pursue money owed to the company (including from you), investigate the directors and report. A good practitioner is fair and practical with directors, but they are not your adviser any more, and you should go into the process knowing that.

The Insolvency Service

The Insolvency Service is an executive agency of the Department for Business and Trade. It does four things that matter to you.

It runs compulsory liquidations through the Official Receiver. When a creditor’s petition succeeds, the Official Receiver becomes liquidator by default and conducts the initial investigation, including a formal interview with the directors.

It investigates director conduct. Every liquidator, private or official, sends it a conduct report within three months. It decides whether to seek disqualification, and brings those proceedings in its own name.

It regulates practitioners. It oversees the licensing bodies and runs the complaints gateway. If a practitioner acts improperly, this is where a complaint goes.

It pays statutory redundancy. The Redundancy Payments Service, part of the agency, pays employees of insolvent companies their redundancy, notice and holiday pay from the National Insurance Fund. Directors on payroll can claim too.

Who you deal with, by situation

Who is on whose side

Nobody in this list is your adviser once a formal process starts. Before it starts, a licensed practitioner is the only one who will sit down with you, look at the whole picture and tell you what is realistic. That is why the order matters: speak to a practitioner while the choice is still yours.

What to do today

1. If the company cannot pay its debts, speak to a licensed IP before a creditor speaks to the court.
2. Check any practitioner’s licence on the Insolvency Service’s register before instructing them.
3. If you have received a letter from the Insolvency Service about your conduct, do not answer it without advice.