Raising the Bar: Higher Ethical Standards for Insolvency Practitioners

Head of Restructuring & Insolvency, Ali Zaidi considers the ethical changes and subsequent challenges that insolvency practitioners face to ensure not only professional but personal conduct of those acting within the industry are beyond both regulatory and moral reproach.

Introduction

On 1 October 2025, a sweeping new Insolvency Code of Ethics (the Code) came into force – ushering in a significant increase in standards and expectations that the industry has seen for some time. Far more than a mere regulatory update, the Code reflects a bold commitment to transparency, fairness and public trust, demanding insolvency practitioners (IPs) not only follow the letter of the Code but embody the spirit of ethical conduct in every aspect of their work including personal conduct where this may be construed as a discredit to the profession.

This article explores how the revised Code will raise the bar for professional and personal behaviour, what it means for IPs in practice, and the steps they must take to meet these higher and broader standards.

Raising Standards

The revised Code is designed to address evolving challenges thus expanding the insolvency landscape. It sets a higher benchmark for integrity, objectivity, professional competence, personal conduct and the use of technology. Unlike previous versions, the 2025 code emphasises not only technical compliance but also the spirit of ethical conduct, encouraging IPs to proactively consider the impact of their actions on all stakeholders, including creditors, debtors, employees, and the wider public.

Key features include a renewed focus on transparency in dealings, a duty to challenge unethical behaviour, and stricter requirements on managing conflicts of interest. The code also requires IPs to demonstrate an understanding of diversity and inclusivity issues, as part of a broader commitment to fairness and respect.

Personal Professional Conduct

A key feature of the revised Code is that it clarifies expectations of professional conduct, emphasising that behaviour standards apply broadly across all professional life contexts, not just including client work, but personal interactions with colleagues, social media presence and anywhere it may be construed that they represent employers or the profession. It introduces a ‘reasonable and informed third party’ test to define these expectations, highlighting the need for fairness, respect, and dignity, and prohibits bullying, harassment, victimisation, and unfair discrimination. The Code also maintains the overarching requirement for IPs not to discredit the profession and to comply with relevant laws, noting that private actions leading to criminal convictions can also harm professional standing.

In the legal profession solicitors and barristers are held to similarly high standards where failings in personal conduct have had severe professional consequences

• Inappropriate Social Media Use: A solicitor was reprimanded after making offensive and derogatory comments on social media platforms. The comments, though not related to legal work, were deemed to be incompatible with the standards expected of the profession, leading to a formal warning and a temporary suspension.
• Bullying and Harassment of Colleagues: A solicitor faced disciplinary action after repeatedly engaging in bullying and intimidating behaviour towards junior staff members within the firm. The conduct included derogatory remarks, undue criticism, and the public undermining of colleagues, which created a hostile workplace environment. The regulator found that such behaviour failed to meet the standards of integrity and respect expected, resulting in a suspension from practice and mandatory participation in workplace conduct training.
• Misuse of Firm Resources: A solicitor was sanctioned after being found to have used the firm’s IT systems to access and distribute inappropriate material during working hours. Although the conduct did not directly relate to client matters, it was deemed highly unprofessional and damaging to the firm’s reputation. Disciplinary measures included a formal reprimand, a financial penalty, and close supervision upon return to work.

The important point to note is that conduct previously considered employment matters such as harassment and bullying are now considered regulatory.

Technology

The revised Code addresses the impact of rapid technological change and digitalisation, including developments in artificial intelligence (AI) by broadening “technology” to ensure ongoing relevance. Key updates include:

• Strengthened guidance on technology use: The Code now provides clearer direction for IPs regarding the appropriate use of all forms of technology.
• Enhanced confidentiality and competence requirements: There is updated guidance in maintaining confidentiality and demonstrating professional competence and due care, particularly in complex digital environments.
• Explicit data protection obligations: IPs are now required to safeguard confidential information throughout the entire data lifecycle.
• Assessment of technology outputs: IPs must determine whether outputs generated by technology are appropriate before relying on them.
• Duty of explainability: There us a new obligation to explain to clients any limitations inherent in professional advice, especially where technology is involved.
• Updated definition of “confidential information”: The Code introduces a new, clearer definition of “confidential information”.

These revisions are designed to ensure that the Code remains robust and relevant in the face of ongoing technological advancements, supporting IPs in upholding the highest professional standards.

Implications for Insolvency Practitioners

The arrival of the revised Code will have far-reaching implications for IPs. Firstly, it demands a cultural shift: IPs must move beyond a ‘tick-box’ approach and embrace a more reflective, principle-led mindset. The Code expects IPs to show that their judgement and decision-making are guided by ethical considerations, not just regulatory rules.

Additionally, the Code expands accountability. IPs should document the rationale behind key decisions, particularly when faced with ethical dilemmas, and to ensure that their actions can withstand scrutiny from regulators, courts, and the public. There is a greater emphasis on continuing professional development, with IPs expected to keep abreast of ethical best practices and changes in the law.

The Code may mean revisiting internal policies, training needs, and quality assurance processes. Ethical challenges shall need to be addressed openly and constructively.

Meeting Higher and Broader Standards: What Insolvency Practitioners Must Do

1. Review policies and procedures: IPs should conduct a thorough audit of existing policies to ensure alignment with the Code. This includes updating conflict-of-interest policies, revising client engagement protocols, and enhancing transparency in all dealings.
2. Invest in training and education: IPs must commit to regular training on ethical issues, engaging with real-world scenarios and case studies. This helps build confidence in managing complex ethical challenges.
3. Foster ethical leadership: IPs are expected to champion ethical behaviour, providing guidance and support to colleagues and creating spaces for open dialogue about ethical dilemmas.
4. Embrace accountability: IPs should maintain clear records of their decision-making processes, demonstrating how ethical principles have been applied in practice. This transparency is vital for regulatory compliance and for maintaining public trust and confidence.
5. Be careful, be smart!: Social media is potentially a minefield for anyone expressing views in a public forum on political or social issues. What you may consider fair and reasonable, others may not so just pause and think before expressing views that are likely to be contentious.
6. Temper that behaviour: It may sound obvious but what may have been considered office behaviour or justified criticism even a decade ago may not be considered appropriate now. Respect for staff and their wellbeing are the focus of today and need to be understood.

Conclusion

The revised Code represents a defining moment for the profession. By raising standards and broadening the scope of ethical responsibility, it challenges IPs to reflect deeply on their role and impact. Those who embrace these changes will not only comply with regulatory requirements but also contribute to a more trustworthy, responsible, and resilient insolvency sector.

About the Author

Ali Zaidi possesses an impressive track record of defending IPs in disciplinary proceedings. His extensive experience is marked by a thorough understanding of regulatory frameworks and an unwavering commitment to upholding the integrity of his clients. Ali is recognised for his strategic approach, clear communication, and ability to navigate complex cases with professionalism and discretion, consistently achieving favourable outcomes for IPs facing scrutiny. His expertise not only reassures clients but also contributes to maintaining high standards within the profession.