What is the Code of Ethics for an Insolvency Practitioner?

What is the Code of Ethics for an Insolvency Practitioner?
What is the Code of Ethics for an Insolvency Practitioner?

The Insolvency Practitioner’s Code of Ethics was created to help IPs meet their professional and ethical obligations. The code applies to all insolvency practitioners and all professional work that relates to:

  • An insolvency appointment;
  • Any work that may lead to such an appointment.

There are numerous recognised professional bodies (RPB) for insolvency practitioners, but all IPs must follow the principles of this code, albeit with some minor modifications. Insolvency practitioners must also ensure that the standards set out in the code are met by all members of the insolvency team.

Summary of the Code of Ethics

The Code of Ethics is an 88 page document you can find here, which details how the code should be applied in specific circumstances. However, as an overview, the code sets out five fundamental principles which guide how IPs should act in the course of their work. This includes:

  • Integrity – IPs should be straightforward and honest in all professional relationships.
  • ObjectivityIPs should not allow any bias or conflict of interest to cloud their decisions.
  • Professional competence and due care – IPs have a duty to maintain professional knowledge and skill based on the latest developments in practice, legislation and techniques.
  • Confidentiality – IPs should respect the confidentiality of the information acquired as a result of professional and business relationships and not disclose such information to third parties.
  • Professional behaviour – IPs should comply with relevant laws and regulations and conduct themselves with courtesy and consideration when performing their work.

Threats to the fundamental principles approach

The environment insolvency practitioners work in and the relationships they form can expose them to threats to the fundamental principles. There are a broad range of threats included in the code:

  • Self-interest threats – Where the financial or other interests of an insolvency practitioner or their practice, or a familial relationship, impact objectivity.
  • Self-review threatsWhere a previous judgement by an individual within the practice needs to be re-evaluated by an insolvency practitioner.
  • Advocacy threatsWhere an individual within the practice promotes an opinion or position to such an extent that the IP’s subsequent objectivity could be compromised.
  • Familiarity threatsWhere an IP becomes too sympathetic or antagonistic to the interests of others.
  • Intimidation threats Where an insolvency practitioner is deterred from acting objectively by threats, whether actual or perceived.  

The safeguards

Where threats to the compliance with the fundamental principles are identified, the insolvency practitioner must consider whether there are safeguards they need to put in place. The code provides some examples of the safeguards that could be applied, but the list is not exhaustive. Examples of the safeguards detailed in the code, include:

  • Leadership that stresses the importance of compliance with the fundamental principles.
  • Policies and procedures to implement and monitor quality control of engagements.
  • Policies and procedures to consider the fundamental principles of the code before the acceptance of an insolvency appointment.
  • Policies and procedures to prohibit individuals who are not members of the insolvency team from inappropriately influencing the outcome of an insolvency appointment.

Written by: Simon Renshaw