What can happen to ‘unlicensed insolvency practitioners’?

The insolvency industry is highly regulated, and insolvency practitioners (IPs) require a significant amount of training before becoming licensed. Occasionally, someone might describe themselves as an ‘unlicensed insolvency practitioner’, wherein they practice and offer advice without the necessary qualifications and registrations.

Due to the industry’s highly regulated nature, The Insolvency Service takes such matters very seriously. So, what can happen to an ‘unlicensed’ insolvency practitioner?

The Insolvency Service’s investigation into ‘Unlicensed Insolvency Practitioners’

In February 2022, a man calling himself an ‘unlicensed insolvency practitioner’ received a 15-year directorial ban after being found the de facto director of a company offering insolvency services while already being disqualified as a director.

The man in question: Kevin Morris, aka Kevin Gordon Sykes, aged 61, from north London, was found to be in breach of an existing disqualification.

The company: Rigil Kent Acquisitions Limited (RKAL) was founded in 2015 and claimed to be an insolvency recovery service, offering struggling companies services that could write off their unaffordable debts, allowing their directors a chance to walk away while not having to enter an insolvency process. Prices ranged between a fee of £5,000 and 10% of the company’s total liabilities.

RKAL claimed they would discuss other insolvency options with their clients, offering ‘Corporate Rescue Sale’, a ‘Scheme of Arrangement’ and Company Voluntary Arrangements (CVAs). While a CVA is a legitimate avenue for insolvent companies to repay their unsecured debts at an affordable rate, The Insolvency Service’s investigation found no evidence that RKAL offered these services.

According to an Insolvency Service press release, Kevin Morris benefited from the company’s trade, returning no money to the creditors of the companies acquired by RKAL.

Nataliia Fox, RKAL’s sole director according to Companies House, was in a relationship with Kevin Morris and is said to have been acting under his direction and instructions. For allowing this and allowing the company to trade in such a way, she received an 11-year disqualification.

The Insolvency Service shut the company down in February 2018, launching an investigation into it and eight connected entities.

“Kevin Morris claimed to be an unlicensed insolvency practitioner, a role that does not exist. As the Court has found, he created a nefarious scheme for the purpose of subverting the insolvency system for his own financial gain, and he flagrantly breached his previous disqualification in doing so.”

Jo Caswell, Deputy Official Receiver.

Why it’s important to go straight to a licensed and regulated insolvency practitioner

There is no such thing as an ‘unlicensed insolvency practitioner’. All IPs must be licensed and regulated by a regulatory body (such as the ICAEW) and must undergo significant training before becoming qualified to carry out their duties. Throughout their work, licensed and regulated IPs must follow the statutory regulations of the Insolvency Act 1986 and Insolvency Rules 1986.

The IP’s main duties are owed to the creditors of the insolvent individual or company and to ensure they get the best result possible.

A licensed and regulated IP should be your first port of call if you spot the signs of financial trouble in your company’s or your personal finances. The faster you act, the greater chance of a more desirable outcome. A licensed IP will offer you the best advice for your circumstances, which could be the following:

• Repaying the debts in affordable, monthly instalments
  If your company is struggling to repay its unsecured debts but would otherwise be profitable, repaying its debts in affordable, monthly instalments could be a viable solution. You can do this via a Company Voluntary Arrangement (CVA). Managed by a licensed IP, these arrangements can see a better return to creditors than if the company were to close, and usually last five years. Once the arrangement concludes, all remaining unsecured debt is written off.
  More on repaying your company’s debts A similar arrangement exists for individuals and sole traders; an Individual Voluntary Arrangement (IVA).
  More on repaying your personal or sole trader debts
• Restructuring a limited company to return it to profitability
  If the company’s debt is of such a level that repaying isn’t feasible, this doesn’t automatically mean the company has to close. The company could enter administration, in which a licensed IP takes control of the company and makes the changes necessary to make it attractive to any potential buyers.
  How administration can help your company
• Closing the company in an orderly manner
  Sometimes despite your best efforts, it may be better to close the company down and draw a line under the insolvency. You can do this by putting the company into a Creditors Voluntary Liquidation (CVL). Doing so allows the company to close in an orderly manner, under the supervision of a licensed IP, and is often preferable to the creditors forcing it into compulsory liquidation.
  Closing your company via a voluntary liquidation

Summary

Despite what some companies may offer, ‘unlicensed insolvency practitioners’ are not an actual role in the insolvency industry. Kevin Morris, who operated as an ‘unlicensed insolvency practitioner’ through Rigil Kent Acquisitions Limited (RKAL), received a 15-year directors’ ban in February 2022 for operating as the company’s de facto director while under an existing ban. To ensure you receive the best help and advice for you or your company, you should speak to a licensed insolvency practitioner (IP) as soon as you spot the signs of insolvency in your personal or business finances.