The Insolvency Code of Ethics treats referrals as a live threat to independence, not an administrative footnote — every introduction, commission arrangement or panel relationship must be run through the Code's conceptual framework before an appointment is accepted. For insolvency practitioners (IPs) and the firms and solicitors who refer work to them, that means identifying the threat a referral creates, evaluating its significance, and applying a safeguard that reduces it to an acceptable level, with the reasoning documented at the time.
This matters because referral and introducer arrangements are one of the areas the Recognised Professional Bodies (RPBs) scrutinise most closely on monitoring visits. A firm that cannot show how it tested a referral against the fundamental principles is exposed, even where the underlying appointment was entirely proper. This article maps the Code's structure onto real referral scenarios: what the principles require, where the threats sit, what safeguards actually satisfy an RPB, and when the right answer is to decline the work.
The five fundamental principles and why referrals test them
The Insolvency Code of Ethics is built on five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Referrals put pressure on more than one of these at once, which is why the Code treats introduced work as a category requiring specific attention rather than routine acceptance.
- Integrity is tested when a referral arrives with an expectation attached — an unspoken assumption that the introducer's preferred outcome will be delivered.
- Objectivity is tested when a commission, reciprocal arrangement or ongoing referral relationship could influence professional judgement on the appointment itself.
- Professional behaviour is tested by how the arrangement would look to an informed third party — the "reasonable and informed observer" the Code repeatedly invokes.
None of this means referrals are improper. Most appointments arrive through some form of introduction — from solicitors, accountants, business advisers or commission-based introducers. The Code's position is simply that the source of an appointment is a fact that must be evaluated, not ignored, and it sits alongside the statutory qualification and conduct regime for IPs set out in Part XIII of the Insolvency Act 1986.
The conceptual framework: identify, evaluate, address
The Code does not give a checklist of forbidden referral types. Instead it sets out a conceptual framework that an IP must apply to every situation, including referrals, in three stages.
- Identify the threat created by the facts of the referral — who introduced the case, on what terms, and what (if anything) is paid or exchanged in return.
- Evaluate its significance, considering both quantitative factors (the size of any fee) and qualitative ones (the nature of the relationship with the introducer, and whether it recurs).
- Address the threat by applying a safeguard that eliminates it or reduces it to an acceptable level — or by declining or ceasing the engagement if no safeguard is sufficient.
This is a judgement-based framework, not a bright-line rule, and the RPBs expect the reasoning to be visible in the file — a point that runs through every section below.
Insolvency Code of Ethics referrals: self-interest and self-review threats
The Code categorises threats to the fundamental principles into five families, and referral arrangements most commonly generate two of them.
A self-interest threat arises where an IP's own financial or personal interest could inappropriately influence judgement — the clearest example being a referral fee or commission paid in connection with obtaining an appointment. The threat is not that a fee was paid; it is that the fee could be seen to have shaped the decision to accept the case, its handling, or the outcome pursued.
A self-review threat can arise where the introducer has already advised the director or the company before the referral, and the IP is later asked to evaluate or rely on work connected to that same relationship without independent scrutiny. Familiarity and advocacy threats can also surface where a firm receives a high volume of work from a single introducer, creating pressure — real or perceived — to keep that source of work satisfied.
None of these threats are automatically disqualifying. The question the framework asks is always the same: after identifying the threat, can it be reduced to an acceptable level, and can that be evidenced?
Key sections that touch introductions and inducements
Several parts of the Code speak directly to referral and introducer scenarios, and firms handling introduced work should be able to point to each of them in their compliance documentation.
- Objectivity across all engagements: requires an IP not to compromise professional judgement because of bias, conflict of interest, or undue influence from a referral relationship.
- Inducements, including gifts and hospitality: addresses situations where something of value is offered or received in connection with obtaining or retaining a referral source, and requires evaluation of intent, not just value.
- Fees and remuneration: requires transparency about how fees connected to a referral are calculated and disclosed, particularly where a referral or commission arrangement affects how remuneration is structured.
- Marketing and professional appointments: governs how appointments are obtained, including through introducers, and requires that the process not mislead creditors or the court about independence.
A firm operating a referral network — whether through commission-based introducers, panel solicitors, or reciprocal arrangements with accountants — should map each source against these provisions before, not after, the arrangement goes live.
Safeguards the RPBs expect to see on referred work
Where a threat from a referral is significant but not disqualifying, the Code expects a safeguard proportionate to that threat. In practice, RPB monitoring visits look for evidence of the following.
- Disclosure to creditors and the court of the source of the appointment and any fee paid or received in connection with it, where material.
- Independent review of the case by a partner or manager not connected to the referral relationship, particularly where the introducer has an ongoing commercial link to the firm.
- Written referral policies setting out which introducers the firm works with, what is paid, and how the arrangement is disclosed.
- Case-by-case threat assessment, recorded at acceptance, rather than a single blanket policy applied without reference to the facts of each referral.
- Clear separation between the introducer's role — bringing the case forward — and the IP's statutory duties once appointed, so the introducer has no further influence over the conduct of the case.
Firms considering how referral fees fit within this framework may find it useful to read our companion piece on Can Insolvency Practitioners Pay Referral Fees?, which sets out the position on payment specifically, alongside the broader legal question addressed in Are Referral Fees Legal in the UK?
When to decline or withdraw from a referred appointment
The conceptual framework only works if "decline" remains a genuine option, and the Code is explicit that no safeguard will always be available. An IP should decline or withdraw from a referred appointment where any of the following apply.
- The threat to objectivity or independence cannot be reduced to an acceptable level by any available safeguard.
- The referral terms would require, or appear to require, a particular outcome favourable to the introducer rather than to creditors as a whole.
- The introducer's prior relationship with the company creates a self-review threat that independent review cannot cure.
- Fee or commission arrangements connected to the referral cannot be disclosed transparently, or their disclosure would itself undermine confidence in the appointment.
Where a referral involves a prior connection between the introducer, the IP and the case, professional clearance procedures also come into play before acceptance — our guide to Professional Clearance for IP Appointments sets out how that process interacts with the ethical assessment described here.
Record-keeping that evidences your independence
The Code's threats-and-safeguards approach is only as strong as the paper trail behind it. On a monitoring visit, an RPB reviewer will look for a file that shows the reasoning, not just the outcome. This complements the procedural record required for the appointment itself under the Insolvency (England and Wales) Rules 2016. Practical record-keeping should cover:
- The identity of the introducer and the nature of the relationship with the firm, including whether it is a one-off or recurring source of work.
- Any fee, commission or reciprocal benefit connected to the referral, and how it was calculated.
- The threat identified at acceptance and the evaluation of its significance.
- The safeguard applied — for example, independent review, disclosure to creditors, or a written referral agreement — and why it was considered sufficient.
- Ongoing review points, particularly for repeat introducers, to check the arrangement has not drifted since it was first assessed.
Firms that treat this as a live register, reviewed periodically, are in a materially stronger position than those that reconstruct the reasoning only when a complaint or monitoring visit arrives. Because the fundamental principles in the Insolvency Code of Ethics apply firm-wide, this record should sit alongside the firm's wider independence and conflict-checking procedures, not as a separate, referral-only exercise.
Frequently asked questions
Does the Insolvency Code of Ethics ban referral fees outright?
No. The Code does not prohibit referral fees as such; it requires the IP to identify the self-interest threat a fee creates, evaluate its significance, and apply a safeguard — commonly disclosure — or decline the appointment if the threat cannot be reduced to an acceptable level.
Do gifts and hospitality from introducers always need to be disclosed?
The Code assesses gifts and hospitality by intent and value rather than a fixed threshold. Trivial and inconsequential hospitality is generally acceptable; anything that could be seen as an inducement to secure a referral relationship requires evaluation as a threat, and disclosure or refusal where the threat is significant.
Who must a referral fee or commission be disclosed to?
Where a referral fee is material to the appointment, the expectation is disclosure to those with a legitimate interest, which typically means creditors and, in court-based appointments, the court. The relevant RPB's disclosure requirements should be checked alongside the Code.
Can an IP accept referrals from the same introducer on a regular basis?
Yes, but a recurring relationship increases the significance of any self-interest or familiarity threat, so it warrants more robust ongoing safeguards, such as periodic independent review, rather than a one-off assessment made when the relationship began.
What happens if a firm cannot evidence how it assessed a referral?
Absence of a documented threats-and-safeguards assessment is itself a finding an RPB will raise on monitoring, even where the appointment was substantively handled well, because the Code requires the evaluation to be demonstrable, not merely assumed. Directors or creditors who consider a referral-related conduct issue has not been properly handled can raise it through the Insolvency Service's guidance on how to complain about an insolvency practitioner.
This article is general information for insolvency practitioners and referring firms, not legal or regulatory advice, and it does not replace guidance from your RPB or independent legal advice on a specific referral arrangement.
If your firm would like to be introduced to a regulated insolvency practitioner or solicitor to discuss a referral relationship or a specific case, Harbourfirst can make that introduction — start an enquiry.