An insolvency practitioner is a licensed professional in the United Kingdom authorized under the Insolvency Act 1986 to take control of the financial affairs of a company or individual that can no longer pay its debts.1Legislation.gov.uk. Insolvency Act 1986 – Section 389 Only someone holding a licence from an approved professional body can legally do the job. Acting as an insolvency practitioner without proper authorization is a criminal offence punishable by imprisonment, a fine, or both.
The role exists because certain formal insolvency procedures cannot be run by the debtor, the creditors, or the directors themselves. The law inserts a licensed, independent person into the process.
When an Insolvency Practitioner Gets Involved
You cannot wind down an insolvent company, propose a formal repayment deal with creditors, or go through bankruptcy on your own. A licensed IP has to manage the process. The usual triggers:
- A company cannot pay its debts as they fall due. Directors who keep trading when there is no reasonable prospect of avoiding insolvent liquidation risk personal liability for wrongful trading, so an IP is often brought in to advise on whether rescue is realistic or whether a formal procedure should begin.2Legislation.gov.uk. Insolvency Act 1986 – Section 214
- A creditor has filed a winding-up petition and the court orders compulsory liquidation. The liquidator who takes over the company’s assets must be a licensed IP.
- An individual wants to propose an Individual Voluntary Arrangement. Only an IP can act as the nominee who drafts the proposal and the supervisor who runs it.
- An individual is being made bankrupt. The trustee in bankruptcy who collects and sells non-exempt assets must be a licensed IP.
What They Do in Company Cases
The specific role depends on which procedure the company enters, but in every case the practitioner takes over some or all of the powers the directors previously held.
Administration
Administration is the most rescue-oriented option. The administrator’s primary objective is to preserve the business as a going concern. Only where that is not achievable will the administrator pursue alternatives, such as selling the business or its assets to produce a better return than immediate liquidation would.3The Gazette. What Is the Role of a Company Administrator Where neither rescue nor a better-than-liquidation sale is possible, the company usually moves into creditors’ voluntary liquidation to finish the winding-up.
Liquidation
Liquidation is the process of selling off a company’s assets and distributing the proceeds to creditors before the company is dissolved. It takes two main forms. In a creditors’ voluntary liquidation, the directors and shareholders start the process themselves. In a compulsory liquidation, a court orders the winding-up, usually after a creditor’s petition. Either way, the appointed liquidator inventories everything the company owns, from equipment and property to intellectual property and unpaid invoices, and converts it to cash.
Investigating Director Conduct
A less obvious but significant part of the job is examining what directors did in the run-up to insolvency. A liquidator can apply to court for a declaration that a director is personally liable for company debts if that director carried on trading when they knew, or should have concluded, that there was no reasonable prospect of avoiding insolvent liquidation.2Legislation.gov.uk. Insolvency Act 1986 – Section 214 The defence is narrow: the director must show they took every step a reasonably diligent person would have taken to minimize losses to creditors.
Practitioners also scrutinize transactions in the period before insolvency. If a company gave away assets or sold them at a significant undervalue, the IP can apply to court to reverse the transaction and recover value for creditors.4Legislation.gov.uk. Insolvency Act 1986 – Section 238 Courts can also examine any officer or other person who has misapplied company property or breached a fiduciary duty, and order them to repay money or restore property.5Legislation.gov.uk. Insolvency Act 1986 – Section 212
What They Do in Personal Cases
Individual Voluntary Arrangements
An IVA is a formal agreement between a debtor and creditors to repay a portion of the debts over a set period, usually five or six years. It is an alternative to bankruptcy and can let the debtor keep assets, such as a home, that a bankruptcy trustee might otherwise sell. An insolvency practitioner has to set up and supervise the arrangement throughout its life.6UK Parliament. Individual Voluntary Arrangements (IVAs)
The IP first acts as nominee, reviewing the debtor’s finances to decide whether the proposal is realistic and worth putting to creditors. If creditors vote to approve, the IP becomes the supervisor, collecting payments and distributing them under the agreed terms. Fees for both stages come out of the payments rather than being charged separately.
Bankruptcy
When an individual is made bankrupt, a trustee in bankruptcy is appointed to take control of non-exempt assets. The trustee identifies everything of value, sells it, and distributes the proceeds to creditors. They also investigate the bankrupt person’s financial history to check whether any assets were improperly transferred before the filing. The Insolvency Act 1986 governs how the trustee manages and distributes those funds.7Legislation.gov.uk. Insolvency Act 1986 – Part XIII, Insolvency Practitioners and Their Qualification
Who the Practitioner Works For
An insolvency practitioner does not work for any single creditor, and they do not work for the directors or the debtor either. Their overriding duty is to act impartially and maximize returns for creditors as a whole, treating everyone affected fairly. In certain appointments, such as administration, the practitioner is also an officer of the court.
All practitioners are bound by the Insolvency Code of Ethics, which requires them to identify and manage threats to their independence and apply safeguards whenever a conflict of interest could compromise their judgment.8GOV.UK. Insolvency Practitioner Code of Ethics9ICAEW. ICAEW Insolvency Code of Ethics 2025 They must file regular progress reports with creditors showing how assets have been realized, what fees have been incurred, and what remains to do. Failing these duties can lead to court-ordered removal, disciplinary action by the practitioner’s authorizing body, or personal liability for losses caused by negligence.
The Statutory Order in Which Creditors Are Paid
Creditors do not all share equally in whatever money the process produces. The Insolvency Act sets a strict hierarchy, and the IP must follow it regardless of which creditor pushes hardest:
- Fixed-charge holders (creditors with security over specific assets, such as a mortgage on a building) are paid from those assets first.
- Costs of the insolvency process, including the IP’s fees, come next.
- Ordinary preferential debts, which rank equally among themselves and include employee wages and holiday pay owed before the insolvency.
- Secondary preferential debts, including certain tax debts owed to HMRC.
- Floating-charge holders, who rank below preferential debts.
- Unsecured creditors — trade suppliers, customers owed refunds, and anyone else without security — come last.
Ordinary preferential debts must be paid in full before secondary preferential debts receive anything. If assets are insufficient, debts within a tier are reduced proportionally.10Legislation.gov.uk. Insolvency Act 1986 – Section 175 A prescribed portion of floating-charge recoveries is also set aside for unsecured creditors, which slightly improves their position where the floating-charge holder would otherwise take everything.
How Someone Becomes One
Candidates usually come from accountancy or law and must pass the Joint Insolvency Examination Board exams, held once a year in November. There are two papers, one on corporate insolvency and one on personal insolvency, and both must be passed for a full licence.11ICAEW. Qualifying as an Insolvency Practitioner Once qualified, a practitioner must be authorized by one of three Recognized Professional Bodies: the Institute of Chartered Accountants in England and Wales, the Insolvency Practitioners Association, or the Institute of Chartered Accountants of Scotland.12GOV.UK. Insolvency Practitioner – Regulated Professions Register Authorization can be full (companies, individuals, and insolvent partnerships) or partial (companies only or individuals only).13Legislation.gov.uk. Insolvency Act 1986 – Section 390A
The Insolvency Service, acting for the Secretary of State, oversees the whole profession through reviews of the RPBs and can also take direct action against individual practitioners.14GOV.UK. Annual Review of Insolvency Practitioner Regulation 2024 Practitioners must also qualify for bonding and hold professional indemnity insurance, which protects creditors if funds are mishandled.
How They Charge
Fees are one of the most contentious parts of any insolvency, because every pound spent on fees is a pound that does not reach creditors. Fees are typically calculated in one of three ways: on a time-costs basis (hourly rates for the IP and their staff), as a percentage of money recovered or distributed, or as a fixed fee agreed in advance. Time costs have historically been the most common method.15UK Parliament. Insolvency Practitioners’ Fees
The fee basis has to be approved by creditors, or by the court if creditors do not engage. Whichever method is used, fees are treated as expenses of the insolvency and paid in priority to unsecured creditors. Creditors have the right to request detailed breakdowns of time spent and to challenge fees they think are excessive.
How to Check or Complain About One
The government maintains a searchable register of licensed practitioners so anyone dealing with an IP can verify the qualification.16GOV.UK. Find an Insolvency Practitioner
If a practitioner appears to be acting improperly, overcharging, or failing to communicate, the complaints process runs in two stages. First, complain directly to the practitioner or their firm. If the response is unsatisfactory, escalate to the authorizing body through the Insolvency Service’s Complaints Gateway, which acts as a single contact point regardless of which RPB authorized the practitioner.17GOV.UK. Complain About an Insolvency Practitioner Complaints must relate to something that happened within the past three years, with an exception where the evidence itself only came to light inside that window.
A Note for U.S. Readers
“Insolvency practitioner” is a specifically British designation. The closest U.S. parallel is the bankruptcy trustee, appointed under the U.S. Trustee Program, part of the Department of Justice.18United States Department of Justice. U.S. Trustee Program A Chapter 7 trustee’s duties resemble those of a UK liquidator, but the regulatory framework, licensing route, and fee rules are different, and under Chapter 11 the company’s existing management usually stays in control as a “debtor in possession” rather than being displaced by an outside professional.19United States Courts. Chapter 11 – Bankruptcy Basics If your situation is in the United States, the rules described above do not govern it.