If your company is going through liquidation, you may have noticed a change in how Insolvency Practitioners (IPs) are approaching the process. More questions. More requests for documentation, both during and sometimes, even, post commencement., and a more forensic review of what happened in the lead-up to insolvency.
For some directors, this can feel unexpected – especially if they believe they’ve already handed over everything required. The same can apply to accountant introducers too, who may also be contacted to supply additional information on behalf of the directors/companies they represent. But this shift is not about suspicion or delay. It’s about a shift in compliance.
The Regulatory bodies including the ICAEW (Institute of Chartered Accountants in England and Wales), and the IPA (Insolvency Practitioners Association) have tightened expectations around how IPs investigate company conduct, particularly where government-backed loans or potential misconduct may be involved. This article explains what has changed, why it matters, and what directors – and sometimes their accountants who often provide some of the information needed – should expect.
A changing regulatory landscape
The role of a Liquidator is defined by statute and regulated by professional bodies. When appointed, an IP must act in accordance with:
- The Insolvency Act 1986 and associated rules,
- Statements of Insolvency Practice (SIPs),
- Guidance from the Insolvency Service,
- The ethical and professional standards of their Recognised Professional Body (RPB), such as ICAEW or IPA
In 2024 and 2025, these frameworks have been reinforced with updated guidance and stricter expectations around director conduct reviews. The Insolvency Service has made clear that IPs must take “reasonable steps” to identify misconduct, recover assets, and report accurately on director behaviour. This includes a deeper scrutiny of financial records, loan applications, and decision-making prior to insolvency. For an overview of these developments, see Restructuring and insolvency: Key developments to watch in 2025.
What are Insolvency Practitioners required to do at Liquidation?
When a company enters liquidation, the appointed IP must:
- Secure and review the company books and records.
- Investigate the causes of failure and any transactions that may prejudice creditors,
- Assess whether directors have acted in accordance with their duties,
- Report any evidence of misconduct to the Insolvency Service (who assess whether disqualification proceedings should be initiated,
- Take recovery action where appropriate, including pursuing claims for wrongful trading, fraudulent trading, preferences, or misfeasance,
These duties are not optional. IPs are personally accountable to their regulators and must demonstrate that they have followed the due process in every case. If they fail to ask the right questions or overlook key information, they themselves risk disciplinary action, regulatory sanctions, or even personal liability. This has been reinforced by recent commentary on claims against insolvency practitioners, which highlights the importance of thorough investigation and documentation.
Why are directors facing more scrutiny?
The increased scrutiny is not about casting blame. It is about ensuring fairness and transparency. Several factors have contributed to the tighter regime:
- Government loan schemes: Bounce Back Loans (BBLs) and Coronavirus Business Interruption Loans (CBILS) were issued with minimal checks during the pandemic. Now, IPs must verify how those funds were used and whether they were obtained or spent appropriately.
- Public interest: There is growing pressure on IPs to recover funds for creditors and taxpayers, especially where fraud or misconduct may have occurred.
- Regulatory enforcement: The Insolvency Service has stepped up its monitoring of IPs, through their RPBs, requiring more detailed reporting and evidence of investigation. This is outlined in the Insolvency Service Annual Report and Accounts 2024–2025, which details enhanced oversight and performance expectations.
- Case law and precedent: Recent legal decisions have reinforced the need for IPs to take a proactive approach to director conduct and asset recovery. For example, a recent Supreme Court’s ruling confirmed that transactions defrauding creditors even applies when assets are transferred through companies controlled by the debtor. This strengthens creditor protections and clarifies that complex corporate structures cannot be used to frustrate legitimate claims. Additional precedent is discussed in the IPA’s case law update, which outlines recent rulings affecting director accountability.
Bounce Back Loans and forensic review.
Bounce Back Loans are a particular focus. IPs are now expected to:
- Confirm the loan was used for legitimate business purposes.
- Identify any personal use or diversion of funds.
- Assess whether the company was eligible at the time of application.
- Consider whether the loan contributed to insolvency.
- Report any concerns to the Insolvency Service
In some cases, this means going back to directors with follow-up questions, even after the initial disclosures. If records are incomplete or unclear, IPs must dig deeper. This forensic approach is essential to protect creditors and uphold public trust. These expectations are echoed in Squire Patton Boggs’ 2025 insolvency predictions, which highlight increased scrutiny of pandemic-era lending.
What should directors expect during liquidation?
If your company is entering liquidation, you should expect:
- A formal request for books, records, and financial data
- A questionnaire or interview covering key decisions and transactions.
- Follow-up queries if anything is unclear or incomplete.
- A professional but thorough review of your conduct as a director
It’s important to respond promptly, honestly, and in full. If you’re unsure about a question or need help locating documents, speak to the IP. They’re not there to catch you out. They’re there to follow the rules.
The importance of transparency and cooperation
Directors who cooperate fully with the IP and provide clear, accurate information are helping to ensure a smooth process. This protects creditors, supports fair outcomes, and reduces the risk of further action.
Remember:
- IPs are legally obliged to investigate and report,
- They must act in the best interests of creditors generally,
- They are accountable to their regulators and the courts,
- They cannot ignore red flags or incomplete records,
If you feel overwhelmed or uncertain, ask for clarification. A good IP will explain what is needed and why. Their role is not to judge. It’s to comply.
Final thoughts: protecting creditors and maintaining trust.
The insolvency process is governed by law, not discretion. IPs must follow strict procedures to ensure that creditors are treated fairly and that any wrongdoing is identified and addressed. This means asking questions, reviewing records, and sometimes going back for more detail.
For directors, the best approach is openness. Provide what’s asked, explain your decisions, and work with the IP to ensure a full and fair review. If you’ve acted properly, you have nothing to fear – and your cooperation will help bring the process to a close more efficiently.
