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Weighing up your options – personal or corporate insolvency

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​There are two realms within the highly charged world of insolvency - personal insolvency and corporate insolvency. While both areas are distinctively unique, insolvency practitioners play an equally leading role across both personal and corporate insolvency. For professionals considering entering the insolvency trade, Matt Cluer, a commercial finance expert at UK Business Finance, examines what navigating insolvency across both personal and corporate spheres entails.

The varied role of an insolvency practitioner

An insolvency practitioner is the only professional authorised to act in relation to an insolvent company or bankrupt individual, according to the Insolvency Act 1986. Therefore, certain activities are strictly reserved for a licensed insolvency practitioner.

An insolvency practitioner can act in the capacity of:

  • Liquidator – to formally liquidate a solvent or insolvent company

  • Administrator – to restructure a company in administration

  • Supervisor – to restructure debts as part of a company voluntary arrangement (CVA)

  • Trustee – to handle the affairs of a bankrupt individual via sequestration or a trust deed (Scotland)

A licensed insolvency practitioner is qualified to deal with both personal and corporate insolvency matters. They must demonstrate their technical knowledge across both areas by passing the JIEB (Joint Insolvency Examination Board) exams, which consist of two papers: Corporate Insolvency and Personal Insolvency.

Corporate insolvency

Corporate insolvency involves navigating financial distress in businesses. A company is classed as insolvent when it is out of cash and therefore, no longer able to fulfil payments as and when they fall due. This gives rise to common insolvency pressures, such as creditor action, cash flow shortages, and threats of legal action, which an insolvency practitioner helps manage.

A licensed insolvency practitioner is usually appointed to advise a company in financial distress. This involves rescuing a company by restructuring company finances or closing a company.  A licensed insolvency practitioner plays a central role in guiding insolvency matters as their knowledge and skillset are critical to business survival, from strategically managing the risk of insolvency to closing a company tax-efficiently.

Personal insolvency

To qualify as an insolvency practitioner, the individual must demonstrate a high level of understanding in personal insolvency, the related procedures, and the Scottish equivalent. Insolvency legislation in Scotland differs from the UK, and therefore, there are stark procedural differences an insolvency practitioner must be fully versed in.

When operating in personal insolvency and handling personal debts, the insolvency practitioner deals directly with the individual whose financial health is at stake. Therefore, professional interactions differ, including a significant change in dynamics when working with clientele across personal insolvency, compared to corporate insolvency.

An enduring profession in the face of change

The role of an insolvency practitioner is multifaceted, from advising company directors on financial health, liaising with professional partners like accountants and legal representatives, to safeguarding jobs. In a changing world where the economic climate and trading landscape are always evolving, insolvency practitioners will always be in demand to provide a helping hand to businesses, often on the brink of failure.

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