Insolvency FAQs

Welcome to the Institute’s Insolvency FAQs. The purpose of this section of the Technical Hub is to answer some of the most common questions members and other stakeholders have in relation to Insolvency engagements.

1. Where can I find information on whether I can accept an Insolvency engagement?
2. Can I accept an Insolvency engagement for an audit client?
3. Where can I find technical guidance for Insolvency engagements?
4. What are Statements of Insolvency Practice (SIPs) and who sets them?
5. What are the guidelines for remuneration on an Insolvency engagement?
6. How can I find the ethical guidelines for Insolvency practitioners?
7. Is there any information available in relation to virtual creditors meetings?
8. Where can I find guidance on the Company Law requirements in relation to Receivers?
9. Where can I find guidance on the Company Law requirements in relation to Examiners?
10. Is there any guidance on Committees of Inspection?
11. Is there any guidance on the Insolvency (Amendment) Act (Northern Ireland) 2016?
12. Where can I find information on the company law requirements in relation to charges and debentures?
13. I am looking for information of Schemes of Arrangement, where can I find it?
14. Is there any guidance on Liquidations (Winding up)?
15. What is the difference between a Members’ Voluntary Liquidation (MVL) and a Creditors’ Voluntary Liquidation?
16. What is the difference between a secured creditor and an unsecured creditor in a liquidation?

1. Where can I find information on whether I can accept an Insolvency engagement?

   In the first instance members must hold an Insolvency Practicing Certificate (in addition to a Practicing Certificate) to accept an Insolvency engagement. For members that hold an Insolvency Certificate, details on the relevant considerations for accepting an Insolvency engagement can be found in Section 5 of the Institute’s Code of Ethics.

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2. Can I accept an Insolvency engagement for an audit client?

   Section 635 of the Companies Act 2014 prohibits an auditor from acting as a liquidator when they are or have been in the previous twenty-four months prior to the date of commencement of the insolvency appointment, auditor to any client. Furthermore, Part 5 (2540.8) of the Institute’s Code of Ethics (the “Code”) outlines that a firm shall not take an insolvency appointment where audit related work was completed within the previous three years. Where audit related work was undertaken more than three years ago a threat to compliance with the fundamental principals of the code may still arise, an insolvency practitioner should evaluate any such threat and consider whether the threat can be eliminated or reduced to an acceptable level. Members should ensure they comply with all requirements of the Code before accepting any engagement.

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3. Where can I find technical guidance for Insolvency engagements?

   The Institute’s Technical Hub has various resources that are useful for Insolvency practitioners, including; Statements of Insolvency Practice (SIPs), Joint Insolvency Committee (JIC) Guidance Papers, Technical Alerts, and Technical Releases. Members should note that while these resources are rooted in the requirements of the Companies Act 2014, they must ensure they comply with all requirements of the Companies Act 2014 in relation to Insolvency engagements.

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4. What are Statements of Insolvency Practice (SIPs) and who sets them?

   Statements of Insolvency Practice (SIPs) are issued to licensed insolvency practitioners by the recognised professional bodies and the Insolvency Service, with a view to maintaining high standards in insolvency work. They set out basic principles and essential procedures with which insolvency practitioners are required to comply, ensuring a common approach to particular aspects of insolvency.

   In the Republic of Ireland, the Consultative Committee of Accountancy Bodies – Ireland’s (CCAB-I) Insolvency Committee set and periodically review of the contents of the SIPs. In Northern Ireland, the Joint Insolvency Committee (JIC) set and periodically review the SIPs in conjunction with the Consultative Committee of Accountancy Bodies’ (CCAB) Insolvency Technical Committee Northern Ireland. SIPs are reviewed on an ongoing basis and the Institute communicate details of when there are changes to SIPs to its members.

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5. What are the guidelines for remuneration on an Insolvency engagement?

   Statement of Insolvency Practice (SIP) 9B Remuneration of Insolvency office holders – Republic of Ireland and Statement of Insolvency Practice SIP 9A Remuneration of Insolvency office holders – Northern Ireland outline the basic principles and procedures that insolvency practitioners are expected to comply with in relation to remuneration.

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6. How can I find the ethical guidelines for Insolvency practitioners?

   Members should refer to the Institute’s Code of Ethics for all ethical requirements. Section 5 of the code deals specifically with the requirements for Insolvency practitioners.

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7. Is there any information available in relation to virtual creditors meetings?

   Technical Alert 01-21 - Guidance for Insolvency Practitioners – Meeting of creditors during Covid-19 pandemic restriction on movement and public gatherings outlines the provisions of the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 regarding virtual creditors meetings.

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8. Where can I find guidance on the Company Law requirements in relation to Receivers?

   Part 8 of the Companies Act 2014 deals with the legislative requirements in relation to Receivers. Additionally, there are two Technical Releases (TRs) issued by the Institute which cover Companies Act 2014 requirements in relation to receivers; TR 07-2015 Receivers, and TR 06-2016 Discharge of receivers.

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9. Where can I find guidance on the Company Law requirements in relation to Examiners?

   Part 10 of the Companies Act 2014 deal with the legislative requirements in relation to Examiners. The Institute have issued a Technical Release (TR) TR 02-2016 Examiners – statutory changes.

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10. Is there any guidance on Committees of Inspection?

    A committee of inspection is a group of people who represent the interests of creditors of a company that can no longer pay its debts and is being wound up by liquidation. The Institute have issued a Technical Release (TR) TR 05-2016 Guidance for members of the committee of inspection in court and in creditors’ voluntary liquidations. The guidance covers the Companies Act 2014 requirements in relation to Committees of Inspection as well as relevant case law pertaining to those committees.

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11. Is there any guidance on the Insolvency (Amendment) Act (Northern Ireland) 2016?

    The Institute have issued a Technical Release (TR) TR 06-2016 Insolvency (Amendment) Act (Northern Ireland) 2016. The TR summarises key changes made by the 2016 Act to the Insolvency (Northern Ireland) Order 1989 (“the1989 Order”)

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12. Where can I find information on the company law requirements in relation to charges and debentures?

    Technical Release (TR) TR 08-2015 Charges and Debentures summarises the key changes made by Part 7 on the Companies Act 2014 to previous company legislation.

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13. I am looking for information of Schemes of Arrangement, where can I find it?

    A Scheme of Arrangement is a procedure which can be used by a financially troubled company to reach a binding agreement with its creditors about payment of all, or part of, its debts over an agreed period of time. A Scheme of Arrangement can be proposed by the directors of the company, or the liquidator of the company. The Institute have issued a Technical Release (TR) TR 09-2015 Schemes of Arrangement. The TR summarises the key changes made by Chapter 1 of Part 9 of the Companies Act 2014 to previous company legislation.

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14. Is there any guidance on Liquidations (Winding up)?

    The Institute have issued a Technical Release (TR) TR 03-2017 Winding Up. The TR summarises the changes made to company legislation governing liquidations in Part 11 of the Companies Act 2014. Part 11 specifies categories of persons entitled to be appointed as liquidator, establishes a procedure for the removal of a liquidator in a voluntary liquidation, and requires the basis of the liquidator’s remuneration to be agreed by the members (members’ voluntary liquidation – MVL) or by the creditors/Committee of Inspection (all other liquidations).

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15. What is the difference between a Members’ Voluntary Liquidation (MVL) and a Creditors’ Voluntary Liquidation?

    An MVL is a solvent liquidation where the shareholders of the company appoint a liquidator to realise assets and settle all the company’s debts in full, and the surplus after repayment of debts is distributed to the shareholders. A CVL is a liquidation of a company which is commenced by way of a resolution of its shareholders although the company’s creditors determine who is to act as liquidator at a meeting of creditors.

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16. What is the difference between a secured creditor and an unsecured creditor in a liquidation?

    A secured creditor is one who holds security over the debt, such as a secured bank loan, or an amount due to the Revenue Commissioners. An unsecured creditor is one who holds no security. In a liquidation, a secured creditor will be paid before an unsecured creditor from the proceeds of the liquidation.

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These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.