Qualification and Authorisation

December 2007

55.3 Acting as an insolvency practitioner

A person acts as an insolvency practitioner if he/she acts in the following capacities:

• In relation to a company - as its liquidator, provisional liquidator, administrator or administrative receiver or, where a voluntary arrangement in relation to the company is proposed or approved, as nominee or supervisor [note 1].
• In relation to an individual - as his/her trustee in bankruptcy, interim receiver, trustee under a deed of arrangement, nominee or supervisor of a voluntary arrangement or administrator of an insolvent estate of a deceased individual [note 2].
• In relation to a partnership - as its liquidator, provisional liquidator, administrator, trustee under article 11 of the Insolvent Partnerships Order 1994 or supervisor of a voluntary arrangement [note 3].

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 55.8) [note 6] or holds an authorisation granted by a competent authority [note 7] (see paragraph 55.10).  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

(Amended December 2010)

A person is disqualified from acting at any time if at that time:

• He/she is an undischarged bankrupt [note 9]
• A moratorium period under a debt relief order applies in relation to him/her [note 9A]
• He/she is subject to a disqualification order or undertaking under the Company Directors Disqualification Act 1986 [note 10]).
• He/she lacks capacity (within the meaning of the Mental Capacity Act 2005) to act as an insolvency practitioner [note 11].
• He/she is subject to a bankruptcy restriction order or a debt relief restrictions order[note 12].

See paragraph 4.59 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 13]. 

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 14].  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 55.10) or the rules of the relevant RPB (see paragraph 55.8).

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 15]. 

55.7 Authorisation - general

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 55.8) or by direct authorisation by a competent authority (see paragraph 55.10). 

55.8 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 16], 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 17]. 

In the Insolvency Practitioners (Recognised Professional Bodies) Order 1986 [note 18], recognition was granted to the following bodies:

• The Chartered Association of Certified Accountants
• The Institutes of Chartered Accountants in England and Wales
• The Institute of Chartered Accountants in Scotland
• The Institute of Chartered Accountants in Ireland.
• The Insolvency Practitioners Association
• The Law Society
• The Law Society of Scotland

The Secretary of State may revoke a body’s recognition if it appears that the body no longer satisfies the specified criteria [note 19], 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 20]. 

55.9 Authorisation by a RPB

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 21].  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 setting minimum standards for authorisation.

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 and the body will invoke internal procedures to select a successor to act as insolvency practitioner for those cases still open.  The body may withdraw authorisation without prior notice to the individual if this is thought necessary in order to protect the public [note 22]. 

The Secretary of State has no direct jurisdiction to withdraw the authorisation of an individual authorised by a RPB. 

55.10 Authorisation by a competent authority (amended April 2009)

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 23].

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 55.11 for further details) [note 24].  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 25].

The Secretary of State is given a discretion to grant authorisation even if the normal prescribed requirements are not met. An example of this may be where the applicant fell short of the prescribed requirements in terms of experience due to illness or maternity leave but the Secretary of State was satisfied that they had sufficient experience to be an insolvency practitioner. 

The application for authorisation must contain the information required by the Secretary of State and be accompanied by the prescribed fee (currently £3,250 for initial authorisation and £3,250 on each anniversary of the authorisation [note 26]). 

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 27] (see paragraph 55.12 for further details). 

55.11 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 28]: 

• Whether the applicant has been convicted of any offence involving fraud, dishonesty or violence.
• Whether the applicant has contravened any provision in any enactment contained in insolvency legislation.
• Whether the applicant has engaged in any practices in the course of carrying on any trade, profession or vocation or in the course of the discharge of any functions relating to any office or employment appearing to be deceitful or oppressive or otherwise unfair or improper, whether unlawful or not, or which otherwise cast doubt upon his/her probity or competence for discharging the duties of an insolvency practitioner.
• Whether in respect of any insolvency practice carried on by the applicant at the date of or at any time prior to the making of the application, there were established adequate systems of control of the practice and adequate records relating to the practice, including accounting records, and whether such systems of control and records have been or were maintained on an adequate basis.
• Whether the insolvency practice of the applicant is, has been or, where the applicant is not yet carrying on such a practice, will be, carried on with the independence, integrity and professional skills appropriate to the range and scale of the practice and proper performance of the duties of an insolvency practitioner and in accordance with generally accepted professional standards, practices and principles.
• Whether the applicant, in any case where he/she has acted as an insolvency practitioner, has failed to disclose fully to such persons as might reasonably be expected to be affected thereby circumstances where there is or appears to be a conflict of interest between his/her so acting and any interest of his/her own, whether personal, financial or otherwise, without having received such consent as might be appropriate to his/her acting or continuing to act despite the existence of such circumstances.

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 29].

There are separate regulations relating to practitioners applying for renewal of their authorisation and these largely deal with minimum hours to have been spent dealing with insolvency work and continuing professional development such as the relevant attendance at courses or seminars, publication of written material, giving lectures, completing tests and reading books or periodicals [note 30].  There are regulations relating to the keeping, and subsequent provision to the Secretary of State, of records relating to the amount and type of work carried out [note 31] and the involvement on continuing professional development [note 32].

The maximum period for authorisation by the Secretary of State is three years [note 33]. 

55.12 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 34].

The grounds under which an application for authorisation is considered are covered in detail in paragraph 55.11.  The grounds under which an authorisation may be withdrawn are broadly similar, dealing with circumstances in which it appears to the Secretary of State that an authorised person is no longer a fit and proper person to act as an insolvency practitioner, has failed to meet the relevant provisions or regulations or provide false, misleading or inaccurate information relating thereto [note 35].  An authorisation may be withdrawn at the request of, or with the consent of, the holder of the authorisation [note 36].

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 37] and the notice should state the date on which it is proposed that withdrawal should take effect [note 38].  The notice should also give particulars of the rights exercisable by the recipient [note 39] (see paragraph 55.13) and should give 28 days notice of the intention to refuse or withdraw authorisation. 

55.13 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 40] (see paragraph 55.57 for more information on the Insolvency Practitioners Tribunal).  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 41].  

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 42].

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 43].  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 44].  The Secretary of State may, if he/she thinks fit, publish the report of the tribunal [note 45]. 

55.14 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 give notice to the Secretary of State and file a copy of such notice at the court [note 46].  Whilst there is a vacancy in office the official receiver becomes liquidator or, as the case may be, trustee ex-officio [note 47].

In these circumstances, the official receiver should make early contact with IPU (see paragraph 55.50) (http://intranet/BSD/IPUnit/IPUnitHome.htm) for guidance and to ensure that assets are not left in jeopardy.  IPU 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 select a successor from the Insolvency Practitioner database on the basis of location, 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.

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 55.17 to 55.20) and, generally, maintain public confidence in the insolvency profession.

IPU will notify interested parties, such as Investigations and Enforcement Services (IES), Estate Accounts Services (EAS) (see paragraph 55.44) and Companies House, of the practitioner’s loss of authorisation.

(See also 48.18 and 48.31 for further information on loss of authorisation) 

55.14A Block transfer of cases – post 6 April 2010 cases

(December 2010)

The IAR introduced provisions to allow the block transfer of cases to one or more replacement office-holders in a single transaction, where an individual who is acting as an office-holder dies, retires from practice, or is otherwise unable or unwilling to continue in office [note 48]. For appropriate cases the court has the power to make an order (‘a block transfer order’), appointing a replacement office-holder in place of the outgoing office-holder who will hold the equivalent office to the outgoing office-holder in each of the cases transferred (i.e. liquidator in any winding up, administrator in any administration, trustee in any bankruptcy etc) [note 49].

An application for a block transfer order may be made to the registrar or district judge by [note 50] [note 51] :

• the outgoing office-holder or any person who holds office with them jointly,
• any person who is proposed to be appointed as the replacement office-holder,
• any creditor in a case included in the application,
• the recognised professional body by which the outgoing office-holder is or was authorised, or
• the Secretary of State.

An applicant (other than the Secretary of State) must give notice of the application to the Secretary of State at least 5 business days before the hearing of the application [note 52]. The application must be served on the outgoing office-holder, every person who holds office jointly with the outgoing office-holder, and such other person as the registrar or district judge directs, all of whom are made respondents to the application [note 53]. The application must contain a schedule setting out the name of each case, the court having jurisdiction over the case, the case number and the capacity in which the outgoing office-holder was appointed, and be supported by evidence as to the circumstances giving rise to the application and the written consent to act of all those proposed to be appointed as replacement office-holder [note 54] [note 55].

Following the making of the application there are various options that the registrar or district judge may consider including making the order, giving directions for the inclusion of further respondents or service of the application on additional persons, or directions for the further consideration of the application [note 56]. Following any order of the court the applicant must ensure that a sealed copy of the order is lodged with the court having jurisdiction over each case affected by the order, for filing on the court file [note 57]. 

55.15 Qualification and authorisation of voluntary arrangement specialists

The Insolvency Act 2000 [note 58] introduced the concept of separate qualification and authorisation for practitioners who are specialists in dealing with Company Voluntary Arrangements and Individual Voluntary Arrangements [note 59].  The qualification and authorisation requirements relating to voluntary arrangement practitioners (as it is proposed that they will be called) will be administered by organisations known as Professional Bodies, and it is from these organisations that practitioners will be granted authorisation.

Currently, the Secretary of State has not recognised any bodies for the purposes of granting authorisation to voluntary arrangement practitioners.  Two organisations have applied to be recognised, and discussions are taking place regarding the requirements for authorisation that will be needed for authorisation by those bodies.  It is expected that the first authorisations under this method will be in April 2008.

Apart from the general disqualification of not being authorised, voluntary arrangement practitioners can be disqualified from acting on the following grounds [note 60]:

• Being an undischarged bankrupt.
• Being subject to a disqualification order or disqualification undertaking under the Company Director Disqualification Act 1986.
• Lacking capacity (within the meaning of the Mental Capacity Act 2005) to act as nominee or supervisor.

There is, currently, no restriction on persons who have been made subject to a Bankruptcy Restriction Order or Bankruptcy Restriction Undertaking acting as a voluntary arrangement practitioner – though this is under review and likely to change.

In addition, voluntary arrangement practitioners will be required to have in force security for the proper performance of his/her functions (see paragraphs 55.17 to 55.20). 

55.16 Examinations

There are two examinations which help an insolvency practitioner demonstrate that they have acquired the necessary educational qualifications for authorisation by a RPB or the Secretary of State. The first is the certificate of proficiency in insolvency (CPI) which is seen as an intermediate step towards the main qualification, the joint insolvency examination board exam (JIEB).  The joint insolvency examination board examination consists of three papers covering liquidations, personal insolvency and receiverships, administrations and company voluntary arrangements.  A pass in the joint insolvency examination board exam is normally a requirement for authorisation as an insolvency practitioner. 

55.17 Security – General

(Amended December 2010)

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 61].

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 62].

The Insolvency (Amendment) Rules 2010 (IAR) restate the provisions previously provided for by rule 12.8 regarding insolvency practitioners’ security for all cases commencing after 6 April 2010. Under rule 12A.56, before appointing or certifying the appointment of an insolvency practitioner, the authorising body (the Secretary of State or RPB) must be satisfied that the person appointed, or to be appointed, has security for the proper performance of that office [note 63].

In addition, the adequacy of the insolvency practitioner’s security should be reviewed from time to time by the creditor’s committee in administration, administrative receivership and bankruptcy cases, and the liquidation committee in a winding up [note 64]. In any insolvency proceedings the cost of the insolvency practitioner’s security shall be paid as an expense of the proceedings [note 65].

55.18 Enabling bond

The initial requirement of qualification is for an enabling bond to provide general cover up to an amount of £250,000 [note 66], which will remain in force for a period of 12 months. The enabling bond is lodged with the insolvency practitioner’s authorising body [note 67] 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. 

55.19 Specific penalty

Specific penalty cover is required in respect of each appointment taken [note 68] 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 69]) in respect of which he/she has been appointed [note 70].  Where the estimated assets are less than £5,000, the specific security must be assessed at £5,000 [note 71] and where they exceed £5 million, the specific security will be assessed at £5 million [note 72].  

55.20 Cover schedule

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 – this is known as the cover schedule [note 73].  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 74] but, in practice, this is likely to follow the format of the information required under the previous incarnation of the regulations, that is:

• New appointments
• Cases where the insolvency practitioner has obtained release
• Cases where the insolvency practitioner has increased his/her cover due to, for example, the discovery of a previously unknown asset.

The schedule is usually required to be returned to the insurer and authorising body within 14 days of the end of the month to which it relates.  In practice, many firms of insolvency practitioners use a computer programme to manage the schedule and its submission. 

The insolvency practitioner is required to make a copy of the schedule available, on the giving of reasonable notice, for inspection by his/her authorising body or the Secretary of State [note 75].

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:

• Any creditor of the insolvent
• The individual insolvent to which it relates
• A contributory, director or officer of the company
• The Secretary of State

[note 76]

The schedule is also required to be submitted to the insolvency practitioner’s authorising body not later than 20 days after the end of the month to which to the schedule relates.  The submission should also include a statement identifying any case in which the insolvency practitioner has obtained his release.  Where no schedule is submitted in relation to the month, a statement confirming a “nil return” or a statement that it is not practicable to supply particulars should be made [note 77].

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