The main aim of an insolvency firm is to rescue a business in the best interest of the company director by offering advice to individuals and businesses in debt and acting on the behalf of companies that are facing insolvency.
There is no doubt an insolvency firm is whom you should contact if you or your business are struggling financially, but what is an insolvency practitioner, what are their duties, and when should you contact them? This guide will explain all.
What is an insolvency practitioner?
An insolvency practitioner, or IP, is an individual who is licensed to help, advise, and act on behalf of companies and individuals who are facing insolvency or financial hardship. An IP can also assist with Member’s Voluntary Liquidation, and company administration.
With a specialist background, knowledge, and experience, insolvency practitioners have the skills and advice required to help anybody experiencing financial difficulties, no matter the industry, challenge, or sector.
Insolvency practitioner vs liquidator
A liquidator is an authorised and licensed insolvency practitioner, so in short, there is not much difference between the two. Both professional liquidators and insolvency practitioners can be found at insolvency firms around the UK, including Newcastle and the North East.
However, there is a difference between company insolvency and company liquidation. When a company liquidates, the liquidator will freeze company assets, cease trading, and close the business. In most cases, its assets are used to pay off outstanding debts, with any remaining funds split between shareholders.
However, if a company is insolvent, it has insufficient funds to pay debts and bills yet is not yet required to close. In this situation, insolvency practitioners will use their experience and skill to recover the business.
Duties of an insolvency practitioner
Insolvency practitioners have many responsibilities and provide a range of services to assist struggling businesses. They work with creditors, company directors, and individuals in all sectors and industries to overcome a range of financial challenges. Some of their most important duties are listed below.
Provides advice
One of the main duties of an insolvency practitioner is to provide advice and support to companies facing insolvency and liquidation. They work closely with company directors, and individuals to create a plan based on knowledge and experience to either save the business, liquidate the business, or pay back creditors. By offering their professional advice, IPs work to help businesses avoid bankruptcy and explain all possible avenues before filing for liquidation.
Negotiate with creditors
When you hire an insolvency practitioner, they legally act on your behalf to make important financial decisions. They will negotiate with creditors in an attempt to agree on a payment plan that ensures they get paid while allowing a business to continue trade.
For the best chance of success, an insolvency practitioner will identify the creditor’s bargaining position, how much a company can afford to pay, and whether a creditor is being reasonable in what they demand.
Liquidator
As previously mentioned, insolvency practitioners also take on the role of a liquidator. As a liquidator, an insolvency practitioner is required to hold and sell a company’s assets to pay creditors and debt. To do this, the insolvency practitioner will become responsible for all company assets and decide on how they are liquidated.
Investigate company activity
An insolvency practitioner is also required to investigate a company’s financial activity and ensure that all financial records are accurate. This process allows an insolvency practitioner to discover any mismanagement and inaccuracies that may have contributed to the current financial situation faced by the company.
When should I contact an insolvency practitioner?
It is important that you seek professional advice as soon as possible if you are experiencing financial difficulties. Obtaining early advice can be essential to the recovery of your business.
If you are looking for advice and support from an insolvency practitioner in the North East, UK, or a liquidator in Newcastle, get in touch with Connect Insolvency to arrange a no-obligation discussion today.