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IVA or Bankruptcy – Part 5

In the fourth article in this series, we looked at the possible effects of insolvency on the careers of those engaged in the medical, dental, veterinary and pharmaceutical professions.

In this fifth article we consider some of the law professions and some of the possible effects of insolvency on the careers of those engaged in the practice or administration of law. It should be borne in mind that the Recognized Professional Body (RPB) governing any such professions will have its own rules and regulations in regard to a member becoming insolvent and these may be revised from time to time. Furthermore, the attitude of any particular RPB and its standard practice in dealing with an insolvent member may also vary somewhat depending on a number of factors.

It is not intended that this short article should be comprehensive in examining the effects of insolvency on the career of a professional. It is simply to illustrate the variety of mandatory and discretionary sanctions which an RPB may apply. In an ideal world the potentially insolvent professional could check directly with his or her RPB to determine such effects but many professionals would be understandably reluctant to do so, lest their questions alert their RPB to the situation prematurely.

A reputable Insolvency Practitioner (IP) could however elicit such detailed information from the RPB on behalf of a professional client on a confidential and anonymous basis, particularly when the client may be insolvent and is considering the merits and effects of two of the most frequently used financial remedies – Bankruptcy (BCY) or Individual Voluntary Arrangement (IVA).

Some of the recognized professional bodies (RPB) governing these and associated professions are the Bar Council, the Law Society, the Institute of Legal Executives, the Institute of Barristers’ Clerks and the Institute of Chartered Secretaries. Insolvency may also adversely affect the careers of a Justice of the Peace and of a Justice on Licence (liquor – personal and premises).

Expulsion from the Bar Council is not mandatory for a member who is bankrupt or in an IVA but the RPB maintains a discretionary power to expel. A member who adopts either of these financial remedies must inform the Bar Council, which will consider whether there has been a breach of conduct on the part of the member. If expelled, re-admission is possible and the Bar Council does maintain a benevolent fund.

The Law Society however makes expulsion mandatory for a member who is bankrupt and may apply this sanction on a discretionary basis for a member who enters into an IVA. If expelled, re-admission is possible and the Law Society does maintain a benevolent fund.

The Institute of Legal Executives, the Institute of Barristers’ Clerks and the Institute of Chartered Secretaries do not make expulsion mandatory for members who are either bankrupt or in an IVA but the sanction may be applied on a discretionary basis. If expelled, re-admission is possible to each of these bodies and they all maintain benevolent funds.

For a Justice of the Peace, sanctions applied in the event of insolvency are entirely at the discretion of the Lord Chancellor.

For a Justice on Licence (liquor – personal and premises), the Licencing Act 2003 makes expulsion together with loss of licence/accreditation mandatory in the event of bankruptcy or entering an IVA.

Anyone applying to join an RPB governing their profession should disclose significant issues relating to their financial status, particularly if insolvent or likely to become so.  Better to address such issues up front than to have to deal with them after joining the RPB as failure to disclose may incline the RPB to exercise its discretionary powers of sanction. Anyone who is already a member of an RPB when threatened with insolvency should familiarize themselves with the rules and regulations of the RPB and try to determine its attitude and standard practice in these matters.

If the RPB maintains a benevolent fund for members, an insolvent member could consider consulting with its trustees but before doing so should consider taking independent legal advice before making what could turn out to be a career threatening decision. A reputable insolvency practitioner will also provide invaluable advice on all the available options open to an insolvent professional. Such advice should be provided free of charge.

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