Becoming an insolvency practitioner (IP) isn’t a career path that most people consider pursuing, even though it could be a popular and lucrative profession for graduates. That might be because not a lot of people know much about this industry and the role an IP plays. So, let’s look into some related terms first, then we will discuss the possible ways of becoming a successful insolvency practitioner.
What Is Insolvency?
There’s a common misunderstanding that insolvency is the same as the bankruptcy or liquidation of a company or an individual. But this is not true, even though insolvency could in many cases lead to bankruptcy. To better clarify the difference, here’s a brief explanation of each term.
- Insolvency: When a company or person can no longer pay their bills as they become due. As long as you’re able to maintain your payment obligations and pay off debts, you remain solvent. You can be insolvent if you default on your payments without being bankrupt.
- Liquidation: The process through which companies dissolve their assets and turn them into liquid cash. This could be a necessary action or simply a choice. The 3 types of liquidation are:
1. A Creditors’ Voluntary Liquidation (CVL)
2. A Members’ Voluntary Liquidation (MVL)
3. Compulsory Liquidation” - Bankruptcy: This can happen when an individual or company is declared incapable of paying their due bills. It’s a legal procedure, so no one is considered bankrupt until they file for it.
Loans
Each country has different ways of handling distressed companies. For example, in the USA, the management remains in control of an ailing company and is given a new status, which is called “debtor in possession.” This is in stark contrast to how the UK manages this issue. You see, the UK favours manager displacing; while the management may remain on the board of directors, it loses its function. This power goes to an external administrator—the IP. Yet, both countries allow debt payment in the form of loans.
England and Wales use an IVA (Individual Voluntary Agreement), where a legal repayment is presented to creditors with an IP. However, this process isn’t available for those living in Scotland. The residents of Scotland can apply for a trust deed instead. Trust deeds and IVAs are both effective in paying back debts, but a closer look at https://www.scottishtrustdeed.co.uk/trust_deed_resource/trust_deeds_vs_iva/ will provide you with the details of how each one works. They have a lot of similarities as well as a few differences. For instance, you may have 5 years to pay back your debt through the IVA, while a trust deed lasts 4 years.
What an IP Does
IP works suit people who like a mental challenge. In essence, your main task is to first try to save a business. If that proves to be impossible, you would then have to make difficult decisions concerning how to liquidate the business and explain to clients why a particular course of action suits them best. To receive a license, it takes several years of hands-on experience, which makes the road to this career more difficult than many others. But with hard work and patience, you can do it.
How to Become an Insolvency Practitioner
Now that you have a better understanding of the basics, you can perhaps consider a career as an IP. In that case, here are some steps you can take:
1. CPI Exam
The CPI (Certificate of Proficiency in Insolvency) covers all areas of insolvency. No prior experience or specific qualifications are needed to take the exam. The courses introduce you to the work of insolvency practitioners.
2. CPPI Exam
Unlike the CPI, the CPPI (Certificate of Proficiency in Personal Insolvency) gives you solid education on insolvency laws and practices.
3. CPCI Exam
For the widely recognized CPCI (Certificate of Proficiency in Corporate Insolvency), a background in finances or law is helpful, but it’s not necessary. This exam could be your first step toward pursuing this career.
4. JIEB Exams
The above are recommended courses to take in order to qualify for the JIEB (Joint Insolvency Examination Board) exams, which every IP must pass. The average age of the examinees is 33, this gives you an idea of just how serious and hard these exams are—which is why the above exams will help you prepare for this one. JIEB exams cover a wide range of technicalities in two papers; corporate and personal insolvency. If you only pass one of the exams, you can apply for a partial license, but you need to pass both for a full license.
5. ICAEW Full License
Upon passing JIEB, you need to qualify for the ICAEW license. The requirements include 600 hours of experience over three years.
The year 2020 has witnessed serious economic repercussions in the business world. Businesses of all sizes are facing extreme financial struggles. Some will make it, while many won’t. It is no surprise that insolvency practitioners are growing in demand as we speak; businesses in all industries need help and advice from insolvency companies to know what their options are. As a successful insolvency practitioner, you can provide that help.