Insolvency Myths

Myth 1. You Need a Licensed Insolvency Practitioner to put a company into Liquidation.

Ask any IP and they will tell you that since the Insolvency Act 1986 invented the Insolvency Licence and the Licensed IP, you need an IP to put a company into Liquidation.

This has been true from a practical standpoint, in that IPs effectively control the insolvency process and act as gatekeepers, using their statutory monopoly to control the market. But it's not technically correct.

In fact, to put a company into Liquidation requires a Director, not an IP.

It is the Director who:

  • signs the Board minutes calling an Extraordinary General Meeting (EGM)
  • signs the letter to the Bank freezing the account
  • signs the notices of the EGM and Virtual Creditors Meeting
  • signs the minutes of the EGM
  • signs the special resolution stating that the Company be wound up voluntarily
  • signs the ordinary resolution appointing the IP as Liquidator
  • acts as Chairman of the Meeting for the three meetings
    1. Directors Board Meeting
    2. EGM
    3. VCM

That is assuming the shareholders vote in favour of the resolutions proposed by the Director(s).

Until the resolutions are passed, and the IP has signed a Consent to Act form - the IP has no official standing.

The real reason an IP deals with pre-appointment matters is because she understands the process, has all the paperwork to hand, and is well positioned to assist the Director accordingly.

But the point to note is "assist the Director/Company". She has no legal powers. Not yet.

The fact is that the company accountant can undertake the role of "assisting the Director" and charge a fee as an expense of the Liquidation accordingly.

To do this he needs access to a case management system (iBoss) that creates the necessary paperwork, and experienced administrators (Findlay James) who know how to process the documents.

Once the Company is in Liquidation, and the IP is appointed Liquidator, then she takes control of the Company from the Directors and can proceed with her duties as the circumstances and statute dictate.

The Director from this point onwards is no longer needed (unless she is required to assist the Liquidator).

Liquidation is a statutory standardised process that can be delivered via software and an online portal, with skilled human interaction required for the non-standard and contentious post-appointment issues where the IP's experience and skill set is required.

The routine tasks are standard, data driven protocols, which is why a non-IP can support the IP in delivering the service using the iBoss software/portal.

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