Qualification and Authorisation
January 2012
55.3 Acting as an insolvency practitioner
A person acts as an insolvency practitioner if he/she acts in the following capacities:
Acts carried out by the official receiver are not considered to constitute acting as an insolvency practitioner [note 4].
Any acts carried out (whether in the United Kingdom or elsewhere) in relation to insolvency proceedings under the EC Regulation which originate in a member state other than the United Kingdom are not considered to constitute acting as an insolvency practitioner [note 5].
55.4 Persons not qualified to act as an insolvency practitioner
A person is not qualified to act as an insolvency practitioner unless he/she is authorised so to act by virtue of the rules of a RPB (see paragraph 55.89) [note 6] or holds an authorisation granted by a competent authority [note 7] (see paragraph 55.11). In addition, a person is not qualified to act unless there is in force security for the proper performance of his/her functions, which meets the prescribed requirements [note 8] (see paragraph 55.17).
55.5 Persons disqualified from acting as an insolvency practitioner
A person is disqualified from acting at any time if at that time:
See paragraph 4.91 for action to be taken in the event of a bankruptcy order being made against an insolvency practitioner.
An individual is required to vacate office if he/she ceases to be qualified to act as an insolvency practitioner in relation to the company or individual [note 14].
55.6 Acting without qualification
A person who acts as an insolvency practitioner in relation to a company or individual at any time when he/she is not qualified to do so is liable to imprisonment or a fine, or both [note 15]. It is possible to be considered as acting as an insolvency practitioner even if the person is not insolvent (for example, a liquidator of a solvent company appointed as a consequence of a members’ voluntary liquidation).
The qualification referred to here relates to both the general qualifications outlined in the act and the specific qualifications set out in the Insolvency Practitioner Regulations 2005 (see paragraph 55.12) or the rules of the relevant RPB (see paragraph 55.9).
A receiver who is not an administrative receiver (for example, a receiver under a fixed charge or a law of property act receiver) is not required to be a qualified insolvency practitioner before he/she can act [note 16].
An insolvency practitioner may be authorised to act in one of two ways. This may be either by being subject to the rules of a RPB (see paragraph 55.9) or by direct authorisation by a competent authority (see paragraph 55.11).
55.8 Joint Insolvency Examination Board
Any person wishing to be authorised as an insolvency practitioner must have passed the Joint Insolvency Examination (JIE), or in the case of eligible applicants from other member states of the European Economic Area that, up to and including 30 September 2007, they have passed an aptitude test demonstrating a level of knowledge equivalent to that attested by a pass in the JIE. From 1 October 2007 eligible applicants from member states of the European Economic Area need to comply with the requirements of The European Communities (Recognition of Professional Qualifications) Regulations 2007.
55.9 Recognised professional body
A recognised professional body (commonly referred to by the initials RPB) is one that incorporates in its rules appropriate provisions to ensure that those who are authorised by it to act as insolvency practitioners are suitably qualified.
The power to grant recognition to a professional body and allow it, in turn, to authorise individuals to act as insolvency practitioners rests with the Secretary of State [note 17], who may recognise a professional body that regulates the practice of a profession and maintains and enforces rules to ensure that those who are permitted by or under its rules to act as insolvency practitioners are fit and proper persons, and meet acceptable standards in education, practical training and experience [note 18].
In the Insolvency Practitioners (Recognised Professional Bodies) Order 1986 [note 19], recognition was granted to the following bodies:
The Law Society of England and Wales and Chartered Accountants Ireland have transferred their regulatory and disciplinary functions to operationally independent bodies (the Solicitors Regulatory Authority and the Chartered Accountants Regulatory Board respectively).
The Secretary of State may revoke a body’s recognition if it appears that the body no longer satisfies the specified criteria [note 20], but the effect of the revocation may be postponed for a specified period to allow those authorised by the body to continue to act for such period [note 21].
A professional body may authorise an individual to act as an insolvency practitioner even if he/she is not a member of the body in question, provided that he/she is bound by the rules of the body [note 22]. Similarly, membership of the body is not, in itself, sufficient for authorisation – the individual must also be bound by the rules of the body.
Each body sets its own rules, which are all broadly the same, and cover the requirements for authorisation (commonly referred to as licensing) in areas such as practical experience, qualifications, insurance (bonding), conduct and fees payable; and matters to be considered to establish whether the applicant for authorisation is a fit and proper person. The Insolvency Service has agreed a memorandum of understanding with the RPBs which sets out an agreed set of principles with those Bodies for the purposes of achieving consistency in the authorisation and regulation of insolvency practitioners.
The body may withdraw an authorisation to act as an insolvency practitioner from an individual if he/she ceases to meet the requirements of the body’s rules. If this happens the individual ceases to qualify to act as an insolvency practitioner. The body may withdraw authorisation without prior notice to the individual if this is thought necessary in order to protect the public [note 23].
The Secretary of State has no direct jurisdiction to withdraw the authorisation of an individual authorised by a RPB.
55.11 Authorisation by a competent authority
The act allows individuals to be authorised to act by a competent authority (which may be authorised to do so by the Secretary of State). Currently, there are no competent authorities authorised by the Secretary of State so any practitioner not authorised by a RPB can apply for authorisation by the Secretary of State, as a competent authority [note 24].
Authorisation will be granted if the Secretary of State is satisfied that the applicant is a fit and proper person to act as an insolvency practitioner and that he/she meets the prescribed educational, practical training and experience requirements (see paragraph 55.12 for further details) [note 25]. Notice of the granting of the authorisation shall be given in writing to the applicant and must include the date from which authorisation is granted [note 26].
The application for authorisation must contain the information required by the Secretary of State and be accompanied by the prescribed fee [note 27]).
The Secretary of State may withdraw authorisation if it appears that the holder of authorisation is no longer a fit and proper person to act, has failed to comply with any relevant provision or regulation or has provided false, inaccurate or misleading information in support of an application for, or maintenance of, an authorisation [note 28] (see paragraph 55.14 for further details).
55.12 Standards required for authorisation by the Secretary of State
The matters to be taken into account by the Secretary of State in determining whether an applicant is a fit and proper person are set out in The Insolvency Practitioners Regulations 2005. These regulations also set out the requirements regarding education, practical training and experience.
The factors to be taken into account in determining whether an applicant is a fit and proper person include [note 29]:
These criteria are not just relevant to the decision whether or not to authorise a person but are also taken into account in considering whether authorisation should be withdrawn on the grounds that the holder is not a fit and proper person.
The regulations also set out detailed provisions to establish whether a person’s practical training and experience are suitable. These include regulations setting minimum educational qualifications, time spent in practice as an office-holder or otherwise dealing with insolvency work. Additionally, the applicant must have a good command of the English language [note 30] and must have passed the JIE.
55.13 The Provision of Services (Insolvency Practitioners) Regulations 2009
In December 2009 the Provision of Services (Insolvency Practitioners) Regulations 2009 made important changes to the duration of authorisations granted by the Secretary of State. These changes were made to ensure that the authorisation function is undertaken in compliance with the EU Services Directive, which seeks to provide for the opening up of the internal market in services through the removal of unjustifiable barriers to service provision.
From 28 December 2009:
As a result of similar changes to legislation in Northern Ireland practitioners directly authorised by the Secretary of State are not able to take insolvency appointments in Northern Ireland, without being separately authorised by DETI.
55.14 Refusal or withdrawal of authorisation by the Secretary of State
The Secretary of State has the power to refuse an application for authorisation, or to withdraw an authorisation already granted [note 31].
An authorisation may be withdrawn by the Secretary of State if it appears to it that the holder of the authorisation is no longer a fit and proper person to act as an insolvency practitioner or the holder has failed to comply with any relevant provisions or regulations or in purported compliance with those provisions has furnished the Secretary of State with false, inaccurate or misleading information. An authorisation may be withdrawn at the request of, or with the consent of, the holder of the authorisation [note 32].
Where the Secretary of State proposes to withdraw authorisation or refuse an application for authorisation he/she must give the holder or applicant written notice of his/her intention to do so, setting out the grounds for the withdrawal or refusal [note 33] and the notice should state the date on which it is proposed that withdrawal should take effect [note 34]. The notice should also give particulars of the rights exercisable by the recipient [note 35] (see paragraph 55.15) and should give 28 days notice of the intention to refuse or withdraw authorisation.
55.15 Rights available following withdrawal or refusal of authorisation by the Secretary of State
The individual on whom notice of withdrawal or refusal is served may, within 14 days of the service of the notice, make written representations to the Secretary of State or, within 28 days of the service of the notice, require that the case be referred to the Insolvency Practitioners Tribunal [note 36]. These avenues are both alternative and supplementary in that the individual may still require the Secretary of State to make a referral to the Insolvency Practitioners Tribunal after first making an unsuccessful written representation to him/her. The time limit for referral to the tribunal in these circumstances is 28 days from the date that the Secretary of State serves notice on the individual that he/she does not propose to alter his/her decision in consequence of the representations [note 37].
The Secretary of State must refer the case to the tribunal within seven days of being required to do so, unless he/she chooses to reverse his/her decision to withdraw or refuse the authorisation and, within those seven days, gives written notice to this effect to the person requiring the referral [note 38].
In the circumstances that a case is referred to the tribunal, it must investigate the matter and make a report to the Secretary of State, who is under a duty to decide the matter accordingly [note 39]. The tribunal must send a copy of the report to the holder of, or applicant for, authorisation and the Secretary of State must serve written notice of his/her consequent decision on the holder, or applicant [note 40]. The Secretary of State may, if he/she thinks fit, publish the report of the tribunal [note 41].
55.16 Action after loss of authorisation
When a liquidator in a compulsory liquidation or a trustee vacates office on ceasing to be qualified to act as an insolvency practitioner, he/she is required to forthwith give notice to the official receiver who, in turn, shall gave notice to the Secretary of State and file copy of such notice at the court [note 42]. Whilst there is a vacancy in office the official receiver becomes liquidator or, as the case may be, trustee ex-officio [note 43].
IPU (part of Business Services Directorate) are responsible for appointing liquidators and trustees on the application of the official receiver for a Secretary of State application. They are also responsible for maintaining the database of insolvency practitioners which feeds into both the internet and the intranet. IPPS are responsible for the overall regulation of all RPBs and authorising bodies and deals with bulk transfer orders.
It is therefore important to ensure that early communication is made with both of these sections to enable them to fulfill their individual functions. IPPS will liaise with the outgoing liquidator/trustee and/or his/her authorising body as to the appointment of a successor practitioner. It is possible, particularly where the practitioner has ceased to be qualified due to retirement or similar, that he/she will find his/her own successor to accept the appointment as liquidator/trustee and the transfer can be conducted by a meeting of creditors or application to court.
There may, however, be problems where authorisation was withdrawn because the insolvency practitioner was considered not to be fit and proper since there may be inadequate records to assist with the realisation of assets. In these cases, where the practitioner had been authorised by the Secretary of State, IPU will take responsibility for ensuring a successor is appointed who has the relevant resources, experience and independence. The official receiver will, on instruction from IPU, be required to make the necessary applications to the Secretary of State for the appointment of the successor liquidator/trustee (see chapter 17). For those practitioners formerly authorised by a RPB, each body have their own procedures for selecting a successor and where there are any difficulties they will be assisted by IPPS.
It may be the case, particularly where there are no further asset realisations to be made, that the official receiver will be required to remain in office (as liquidator or trustee ex-officio) to close the administration. It is, however, desirable to seek the appointment of a successor insolvency practitioner to assist in gathering evidence of possible fraud or dishonesty, bring the insolvency to a successful conclusion, trace and realise assets, pursue claims under the insolvency bond (see paragraphs 55.18 to 55.20) and, generally, maintain public confidence in the insolvency profession.
IPU will notify interested parties, such as Disqualification Unit, Estate Accounting Directorate (see paragraph 55.47) and Companies House, of the practitioner’s loss of authorisation.
(See also 48.18 and 48.31 for further information on loss of authorisation)
An insolvency practitioner will not be qualified to act in relation to a company or individual unless there is in force security for the proper performance of his functions and that security meets the prescribed requirements as defined in The Insolvency Practitioners Regulations 2005 [note 44].
The security, which is referred to as a bond, must be approved by the Secretary of State and makes the surety (the insurers who issue the bond) jointly liable with the insolvency practitioner for losses in relation to the insolvent caused by the fraud or dishonesty of the insolvency practitioner (whether alone or in collusion), or the fraud or dishonesty of any person committed with the connivance of the insolvency practitioner [note 45].
IPPS has responsibility for approving bonds.
The initial requirement of qualification is for an enabling bond to provide general cover up to an amount of £250,000 [note 46], which will remain in force for a period of 12 months. The enabling bond, or a copy of the bond, must be lodged with the insolvency practitioner’s authorising body [note 47] and can be called upon if the insolvency practitioner fails to obtain a specific penalty (see paragraph 55.19) or the specific penalty obtained is insufficient.
Specific penalty cover is required in respect of each appointment taken [note 48] and where there is a joint appointment each insolvency practitioner must obtain specific cover in an amount not less than the estimated value of the insolvent’s assets (based on any statement of affairs produced [note 49]) in respect of which he/she has been appointed [note 50]. Where the estimated assets are less than £5,000, the specific security must be assessed at £5,000 [note 51] and where they exceed £5 million, the specific security will be assessed at £5 million [note 52].
An insolvency practitioner is required to maintain a record of all specific penalty sums that are applicable in relation to any case where he/she is acting [note 53]. The terms of the bond will dictate what information is required to be submitted to the surety, and the date by when it is to be submitted [note 54] and will include:
Every insolvency practitioner shall submit to his authorising body not later than 20 days after the end of each month during which he holds office in a case:
The insolvency practitioner is also required to keep a copy of the schedule submitted by him in respect of a company or individual for a period for two years after his/her release. A copy of the schedule is required to be produced for inspection on demand by:
[note 56]
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