Conflict checks on insolvency referrals need to go further than a standard new-client search, because a referred case brings a second party — the referrer or introducer — into the risk picture. Before accepting any introduced instruction, a firm needs to check the company, its directors, the referrer and, where relevant, the introducer's own commercial links to the matter.
This matters because referred work often arrives with less background than a direct enquiry. The introducer may have an existing relationship with the company, a prior instruction with a connected entity, or a commercial interest in the outcome. None of that is unusual, but each one is a conflict signal that has to be screened before appointment.
This guide sets out a practical process for conflict checks on referred insolvency work: what to search, what to record, and when the right answer is to decline the instruction.
Conflict checks on insolvency referrals: risks unique to referred work
A direct instruction usually involves one relationship to check: the firm and the prospective client. A referred instruction adds at least one more.
- The introducer's prior involvement. Has the introducer previously referred, advised or transacted with this company or its directors?
- Connected referrals. Is the same introducer also referring a creditor, a connected company, or a director of a related entity in the same matter?
- Commercial incentive. Does the referral arrangement create pressure to accept work that would otherwise be declined? A referral fee should never influence a conflict decision — see our note on Are Referral Fees Legal in the UK? for how fee arrangements should be structured and disclosed.
- Panel history. Has another firm on the same introducer's panel already been approached about, or declined, this instruction?
None of these points automatically rules out taking the case. They simply mean the conflict check has to cover the introducer relationship as well as the client relationship.
Checking the client, the referrer and the introducer
A thorough conflict search for referred insolvency work has three layers, run in parallel rather than treated as a single box-tick.
The client
Standard checks apply: the company, its directors, any trading names, and connected companies at the same registered address or with overlapping directors. Cross-reference against the firm's existing client list and any prior appointments.
The referrer
Establish who is actually making the introduction — an accountant, solicitor, business adviser or lead-generation introducer — and whether they have any existing engagement with the company beyond the referral itself. A referrer who also acts as the company's accountant, for example, has a different risk profile to one making a one-off introduction. It is also worth checking The Gazette's insolvency notices for the company and any connected entities, to see whether a prior appointment, notice or restriction already exists.
The introducer
Where the referral comes through a platform or panel arrangement, check whether the introducer is also connected to a creditor, a competing bidder for the business or assets, or another party with an interest in the outcome. This is a separate check from anti-money laundering due diligence on the client — for that process, see AML Checks on Referred Insolvency Clients.
Prior professional relationships to screen for
The regulatory objectives for insolvency practitioner regulation place independence and integrity at the centre of appointment decisions, and firms should be able to demonstrate that a referral has not compromised either. Screen specifically for:
- Prior advisory work for the company, its directors, or a connected company within a reasonable look-back period.
- Existing appointments over related or group entities, including dormant or associated companies.
- Personal connections between firm staff, the referrer and the company's directors.
- Secured creditor relationships — has the firm, or a partner, previously acted for a bank or asset-based lender now holding security over the company?
- Prior formal insolvency involvement, such as a previous administration, CVA or liquidation connected to the same directors.
Where a genuine or perceived conflict is identified but the appointment can still proceed with appropriate safeguards, this typically needs to be evidenced through the professional clearance process — see Professional Clearance for IP Appointments for how that clearance is obtained and recorded.
Recording the conflict search and outcome
A conflict check that is not recorded is difficult to defend later, particularly if the appointment is later scrutinised. The file should show:
- The date the conflict search was run and who ran it.
- Every entity searched — company, directors, connected companies, referrer and introducer.
- Any matches found, and the reasoning applied to each one.
- The decision reached: accept, accept with safeguards, or decline.
- Where relevant, confirmation that professional clearance was requested and received.
This record should sit on the engagement file from the outset, not be reconstructed after appointment. A short, contemporaneous note is far stronger evidence than a later reconstruction of "what we would have checked".
When a conflict means you must decline
Some conflict findings can be managed with disclosure, information barriers or a formal clearance letter. Others cannot, and the referral should be declined regardless of the commercial relationship with the introducer.
Declining is generally the right course where:
- The firm currently acts, or has recently acted, for a major creditor with a direct interest in the outcome.
- The referrer has an undisclosed financial interest in the appointment beyond a standard referral fee.
- A partner or senior staff member has a personal relationship with the directors that cannot be adequately managed.
- The firm holds confidential information from a prior engagement that would be relevant to, and could prejudice, the new appointment.
Turning down a referral for conflict reasons should not damage the introducer relationship if the process is transparent. A reputable introducer expects firms to run proper conflict checks and will usually redirect the matter to another panel member without friction. The duties involved sit within the wider statutory framework set out in the Insolvency Act 1986, which underpins how practitioners are expected to act once appointed.
Frequently asked questions
Do we need to check connected group companies, not just the referred entity?
Yes. A conflict check limited to the named company can miss a prior relationship with a parent, subsidiary or sister company that shares directors, shareholders or a registered address.
What if the referrer is also a creditor of the company?
This is a significant conflict signal. It does not automatically prevent the appointment, but it must be disclosed, documented and considered as part of the independence assessment before accepting.
Does a pre-pack sale change what we need to check?
Yes. Pre-pack administrations carry additional scrutiny of independence and connected-party sales, so the conflict check should specifically cover any prior relationship between the firm, the referrer and the proposed purchaser of the business.
How far back should the conflict search go?
There is no single fixed period in law; firms typically apply a look-back consistent with their own conflict policy and professional guidance, focused on relationships that could reasonably affect independence or judgement.
Can a referral fee arrangement itself create a conflict?
A properly disclosed, arm's-length referral fee is not itself a conflict, but an arrangement that ties fee levels to accepting particular cases, or that is not disclosed to the client, can undermine independence and should be reviewed.
This article is general information for firms handling referred insolvency work and is not legal or regulatory advice. Firms should apply their own conflict policy and take advice from their regulatory body or legal counsel on specific cases.
If you handle referred instructions and want to discuss how introductions are structured and passed to regulated specialists, start an enquiry with Harbourfirst.