Of all the challenges and obstacles you will come across in life, nothing will be as complicated as starting a business. It is one wild ride that will take you on a rollercoaster of emotions, and it will be unlike anything you have ever experienced in your life.
While there are many reasons that make being a business owner quite a daunting task, it is financing that always causes the biggest problems. Whether it is getting it, in the beginning, to get things going, making it, or keeping it, the money will always be the main challenge.
Unfortunately, not all businesses make it, and some end up losing money. This is why you should know and learn about insolvency practitioners and what they do.
Who They Are And What They Do
Insolvency is when a company or an individual is unable to meet their financial obligations. This might be now, meaning the company/person is unable to meet its current obligations due to a problem with cash flow, although they might have assets that are not liquid. A balance sheet insolvency, on the other hand, is more of a projection that the current assets are not enough to pay all debts, which might lead to bankruptcy. So, where does an insolvency practitioner (IP) come in?
Well, they are the fixers in those situations. They are licensed and authorized individuals who have both the experience and the credentials to deal with insolvent companies or individuals. They basically come to a company in financial straits and advise on financial matters and how the business could come back on its feet.
You should also know that these experts are the ones who handle the liquidation process should it get to that. They basically sell the assets of the company or the individual and handle creditor’s claims as well as distribute any remaining assets on shareholders. Liquidation can be voluntary, which is when the stakeholders willingly agree to sell the business assets because it is not working out, or involuntary when they do it because they have no other choice to pay the debts.
Who Can Appoint Them?
There are several ways through which an insolvency practitioner can be appointed. They can be appointed by the creditors who the company or business owes money to, or they could be appointed by the courts should things escalate to that extent. Most commonly, though, it is the company board of directors itself that appoints the IP to provide advice on their current situation. You should know, though, that the insolvency practitioner works in the best interest of creditors, and that is their first concern.
What Are Their Credentials?
Can anyone work as an insolvency practitioner? Well, yes, but it is not easy. You need to get licensed to work as an IP, and that entails studying for and passing the insolvency examination –– The Joint Insolvency Examination Board (JIEB) tests. Passing the licensing exams is only the first step, though.
You also need some experience doing insolvency work, because it is quite a tricky line of work that requires hands-on experience. Last but not least, the IP should prove to an authorizing organization or a regulator that they are fit to work as an insolvency practitioner.
Who Pays For Their Fees?
The person or entity who pays the insolvency practitioner’s fees is usually the one who starts the insolvency process. So, if it was the board of directors of a company who opted for voluntary liquidation, they are the ones who are going to pay the IP. If a creditor brings the matter to the court to force a compulsory liquidation so they could get their money, it is they who will pay the fees, and so on.
How Do You Hire An Insolvency Practitioner?
Well, most of them come from accounting or legal background, but the tricky part is in finding a licensed IP who has the right credentials. You will come across quite a few shady companies offering insolvency services and advice, and they might not be licensed or qualified to do so. This is why you need to make sure you are dealing with entities or individuals who have passed the JIEB exams and possess the necessary working experience to help you and your company get through this.
It is quite a rough patch for any business or company to go through insolvency and the complications that arise with it. The important thing is you take your time looking for the right insolvency practitioner so they could get advice on how to handle this situation.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.