The insolvency practitioner's role in corporate insolvency
With few exceptions the Insolvency Practitioner's (IP) duty in insolvency appointments is to maximise the realisation of assets and when appropriate to pay a dividend to the creditors from surplus funds in the order of priority as laid down in law.
There are several types of insolvency procedures in both personal and corporate cases, with different legislative requirements. In many insolvency processes the IP is entitled to trade a business, sometimes requiring specific court sanction to do so. In liquidations however the liquidator can only trade on if by doing so he can achieve a better realisation for the creditors.
Insolvency practitioners are required to submit reports on directors to the authorities. Errant directors may be prosecuted or disqualified from acting as directors.
The legislation, regulations and Statement of Insolvency Practice (SIP) 9 lay down the rules with which IPs must comply when seeking remuneration for their services. There are minor differences in legislation and practice but in essence all IPs must be able to provide documentation in support of their claims for remuneration, whether the claims are submitted for approval to the creditors or to the courts. The law provides for the IP advising creditors of the fee that has been fixed and it provides creditors with an appeal process.
A brief overview of the different types of corporate insolvency processes follows.