In the UK a new Insolvency Code of Ethics will apply from 1 May 2020 to all insolvency practitioners in the UK. The Code had to be brought up to date, particularly in relation to to referrals of work and commissions, the use of advertising, websites, purchasing of data and with more services are being offered by firms of IPs. In the UK these are ‘accountancy’-firms. Also, IP’ remuneration and insolvency appointments, and to IPs as employees of a firm have been topics addressed.
Some new or revised rules seems interesting enough to take into account when thinking about ethical rules of an IP in the individual countries on the European continent, for instance paying or receiving referral fees and commissions creating a self-interest. Both in that case as well as dealing with conflicting appointments, firms should safeguard themselves by having and applying clear guidelines and policies (for example by disclosure of the process undertaken to evaluate the best value and service offered despite the relationships) or by setting up separate practice areas to isolate and protect confidential information and to limit access to files.
The renewed Code requires an IP to exercise professional judgment in determining whether a conflict of interest calls for ‘specific disclosure and explicit consent’, or whether the appointment should be declined. Such a ‘disclosure and consent’ can take different forms, for example, to the court at the time of appointment, or by obtaining consent from a creditors committee or from a secured lender, or by disclosing to creditors. Again, this may apply (differently) based on national rules and guidances in this area. Any disclosure must include the circumstances of the particular conflict and how any threats created are to be addressed.
The Code contains a dedicated section on Non-compliance with laws and regulations (‘NOCLAR’), providing additional guidance on where an IP might encounter and report breaches of the law in the course of carrying out their professional duties. There is no misunderstanding that when an IP is engaged in a firm as an employee, contractor, partner, or director, the legal form of the engagement has no bearing on its ethical responsibilities. However, the Code notes that an IP who is an employee ‘… might have a reduced ability to control or influence matters within the firm which might affect the actions available as safeguards to address threats to compliance with the fundamental principles’.
The Insolvency Code of Ethics applies to all IPs, irrespective of their authorising body, which in the UK still are (I think) five. It applies to all professional work relating to an insolvency appointment and to any work that may lead to such an appointment. For this reason, similar bodies in other European countries or individual IPs, who wish to get an idea about the latest developments on ‘ethics’ in the UK, should take a serious look at it.