Although the roles of an Insolvency Practitioner are wide and vary depending on the particular type of insolvency procedure, usually his main task is to realise the assets of a person or company who owes money and to distribute the funds collected to its creditors in accordance with the law.
In some other cases, their main task may be to try to rescue a business and therefore they may simply be required to offer professional advice in order to prevent insolvency.
Another important duty is that of investigating the affairs of the company and the conduct of its directors. The IP must file a report to the Secretary of State if their conduct has been unfit or there is possible wrongful or fraudulent trading.
The specific roles an IP can hold depending on the insolvency procedure are the following:
- Provisional liquidator
- Administrative receiver
- Nominee and/or supervisor of a voluntary arrangement
In an administration, the IP acting as administrator will prepare a proposal for approval by the creditors setting out how he intends to achieve the purpose of the administration, which should be the rescue of the company as a going concern or the achievement of a better result for creditors as a whole than in a liquidation.
A provisional liquidator may be appointed in a compulsory liquidation before a liquidator is formally appointed by the court. The assets and potential creditors are therefore protected until the court hears the winding-up petition. The provisional liquidator does not take part in the realisation of assets.
In a liquidation, an IP acting as a liquidator will realise the company’s assets and distribute the funds equally amongst creditors.
In a compulsory liquidation, the liquidator takes full control of the company from its director in order to wind up and close down the company as well as investigating the conduct of directors in the time leading up to insolvency.
In a Members’ Voluntary Liquidation (solvent liquidation), the liquidator has to ensure the correct distribution of company funds amongst its members. He may also help the directors of the company to meet their legal duties, for example, calling meetings of the shareholders and creditors.
As an administrative receiver, an IP is appointed by a secured creditor to sell the specific company’s assets so that the appointing lender can recover money owed to them. The IP does not have a duty to creditors as a whole.
In voluntary arrangements, the IP will be the nominee for the proposed arrangement. If the proposal is approved, the nominee becomes the supervisor and implements the arrangement in accordance with the terms of the proposal.