How to Become an Insolvency Practitioner In

REMUNERATION OF INSOLVENCY PRACTITIONERS The article is provided by Devorah Burns of the national organisation The Insolvency Service, based in London. The Insolvency Service operates under a statutory framework – mainly the Insolvency Acts 1986 and 2000, the Company Directors Disqualifications Act 1986 and the Employment Rights Act 1996. If you have any questions on this article, please send them to the author at Devorah.Burns @insolvency.gsi.gov.uk or [email protected] We welcome further contributions to this series, so if you would like to inform our readers of the regulations for becoming an IP in your jurisdiction, please contact the editors. All you need to know about becoming an Insolvency Practitioner: Great Britain The latest in our series of articles on the legal status and remuneration of insolvency practitioners examines the British rules and regulations Access to to pay an annual fee, which covers the costs Insolvency Practitioners in the profession associated with authorisation and England, Wales & Scotland. regulation. The Insolvency Service is responsible for The Secretary of State (SoS) may authorise EU Directive 2005/36 provides for the the regulation of insolvency practitioners insolvency practitioners, as may seven recognition of professional qualifications working in Great Britain (i.e. England, professional bodies (the RPBs). The RPBs throughout the relevant states and The Wales & Scotland) and the Department for represent accountants, lawyers and those European Communities (Recognition of Enterprise, Trade & Investment in Northern who only work as insolvency practitioners. Professional Qualifications) Regulations Ireland is responsible for the regulation Most insolvency practitioners are 2007 (The Regulations) make provision of insolvency practitioners who work in authorised by one of the RPBs. Each for such recognition. Northern Ireland. This article only deals of the RPBs has it’s own educational Applications to the SoS with the requirement for insolvency requirements and members of the To be authorised by the SoS on the practitioners in Great Britain; the accountancy bodies and lawyers usually first application the applicant must have legislation relating to Northern Ireland have a university degree. However, all of completed at least 7000 hours of insolvency is very similar. It should be noted that the authorising bodies require the applicant work experience in the past ten years; at Scotland has it’s own insolvency to have passed the examinations set by the least 1400 of which must have been done legislation in relation to individual Joint Insolvency Examination Board (JIEB) insolvencies (sequestration) and certain within the two years prior to the unless the applicant holds equivalent processes in liquidations and receiverships application and at least 1000 hours of qualifications obtained in an European differ from those in England and Wales. which must have involved the management Economic Area State (the SoS is also able to In Scotland, bankruptcy is supervised by or supervision of the estate on behalf of recognise equivalent qualifications obtained the Accountant in Bankruptcy, who is an the office holder. Where the applicant for in other jurisdictions). All of the authorising official of the Scottish Government. authorisation has previously been an office bodies require the insolvency practitioner holder different criteria relating to the 20 | REMUNERATION OF INSOLVENCY PRACTITIONERS number of cases and hours worked apply. Release from obligations The insolvency practitioner has to pay an The conclusion of the insolvency “the applicant must annual fee of £2,500 to the SoS. As well as administration does not automatically being “fit and proper” the applicant must release the insolvency practitioner from have completed at have a good command of English. the duties and liabilities that relate to least 7000 hours of If an applicant from a relevant state holding such office. As well as those seeks to become established in Britain, responsible for the appointment, the insolvency work” The Regulations provide that they will Court and the SoS may also provide for have to sit an aptitude test where there are the insolvency practitioner’s release. In significant differences in law and practice Scotland, trustees in sequestration apply Guidance on charging remuneration in the home state. to the Accountant in Bankruptcy for Statements of Insolvency Practice (SIPs) Prior to taking up any appointment their release. provide regulatory guidance to insolvency practitioners and SIP9 specifically deals Once the applicant is authorised to act as Control body an insolvency practitioner they are unable with remuneration. In October 2004 the court issued a Court Practice Statement to accept any appointments until they have The body responsible for the authorisation which provides guidance on matters that obtained a bond, which protects the estate of the insolvency practitioner is also the court will take into account when it is from any losses arising from the fraud or responsible for monitoring the work of dealing with an application for approval or dishonesty of the insolvency practitioner. the insolvency practitioner to ensure that a review of remuneration. As the amount of The bond also covers fraud or dishonesty the practitioner remains a fit and proper remuneration is subject to review by the by a member of staff if this occurs with the person to be authorised, and this includes court neither the SoS, nor the RPBs are connivance of the insolvency practitioner. dealing with any complaints. It is also able to deal with complaints about the Some of the RPBs and bond providers also possible for the Court to review any actions amount of remuneration charged by a require that the insolvency practitioner or decisions of the insolvency practitioner. have professional indemnity insurance. practitioner, though they will consider An insolvency practitioner is required Remuneration complaints that remuneration drawn was not properly approved. to comply with both an Ethical Code and Insolvency practitioners tend to only be Statements of Insolvency Practice (SIPs). appointed in cases where there are assets. Best Practice and continuous These professional standards are agreed In Scotland, all company insolvencies are between all of the authorising bodies, and administered by an insolvency practitioner, Professional development breaches of them may result in disciplinary there being no Scottish equivalent of the All of the authorising bodies are concerned action. Official Receiver. In England & Wales only, to ensure that insolvency practitioners act for bankruptcies and companies in in an appropriate professional manner and Appointment compulsory liquidation (i.e. the court has towards this end issue guidance on best made the bankruptcy or winding-up Depending upon the nature of the practice to be followed by insolvency order), the official receiver, who is a practitioners. Where the insolvency insolvency, the appointment (and removal) government official, becomes trustee and as office holder may be by the creditors, practitioner fails to follow such guidance liquidator in the majority of cases where he may be required to justify his actions to the Court, the SoS or the members of the there are few or no assets. In Scotland, the company (shareholders). In Scotland, a his authorising body. All insolvency Accountant in Bankruptcy may become the practitioners are also expected to ensure trustee in sequestration is either appointed interim or permanent trustee or an by the Court or elected at a meeting of that they undergo continuing professional insolvency practitioner may be appointed development, which must be evidenced. creditors. From 1 April 2008 the to carry out that office. Accountant in Bankruptcy will award The Insolvency Service provides In England & Wales, where an information to insolvency practitioners on bankruptcy and appoint the trustee on insolvency practitioner is appointed, in debtors’ applications. all aspects of insolvency law and practice, most cases the creditors’ determine whether including SIPs & the Ethical Code and this The roles in which an insolvency the remuneration should be fixed either as is available via its website practitioner may act are: a percentage of the value of property with http://www.insolvency.gov.uk/insolvencyprof • provisional liquidator; which he has had to deal, or by reference essionandlegislation/iparea/iparea.htm • interim liquidator and liquidator; to the time properly given by the • administrator; insolvency practitioner and his staff in • administrative receiver; dealing with the administration. If the • provisional trustee or trustee in remuneration has not been fixed by the bankruptcy (in Scotland the roles are creditors it may be fixed by the court. interim or permanent trustee); The court may also review the amount of • nominee or supervisor of a voluntary remuneration charged by the insolvency DEVORAH BURNS arrangement (in Scotland, trustee of practitioner. works for The a protected trust deed). In Scotland, the remuneration of a Insolvency trustee in sequestration is determined by The insolvency practitioner has to ensure Service, based the commissioners or, if no commissioners that the appointment will not impair, or in London reasonably appear to impair, his objectivity. were elected by the creditors, by the The Ethical Guide provides detailed Accountant in Bankruptcy. The trustee, information about conduct issues, which the debtor and the creditors each have the insolvency practitioner is obliged to the right to appeal to the Sheriff against consider. the determination of the trustee’s remuneration. eurofenix | 21.

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