Professional clearance in insolvency means an insolvency practitioner (IP) writing to any prior IP, accountant or adviser who has acted for a company or its directors, asking whether there is any reason not to accept a referred appointment. On referred work — where a case arrives via an introducer, panel or referral relationship rather than a direct approach — this step carries extra weight, because the IP must be able to show the appointment was accepted on its merits, not simply because a referrer sent it.
This article sets out the clearance and conflict-check workflow a firm should follow before accepting a referred insolvency appointment, the enquiries to make of prior advisers, and how to record the decision so it stands up to later scrutiny.
Why professional clearance matters more on referred insolvency appointments
Clearance exists to protect the profession's independence and the public interest, not to create paperwork for its own sake. The Insolvency Act 1986 qualification requirements for insolvency practitioners sit behind this: only a suitably authorised person may accept a formal appointment, and that authorisation depends on maintaining independence.
Referred work adds a layer that self-generated work does not have: a commercial relationship with the party doing the introducing. Regulators and courts will look closely at referred appointments where a prior adviser is displaced, where fees flow to an introducer, or where the same firm has acted for connected parties. Clear, documented clearance is the firm's best evidence that the referral did not compromise its judgement.
- It confirms no prior adviser holds information that would create a conflict.
- It tests whether the IP's independence could reasonably be questioned by a creditor or the court.
- It creates a contemporaneous record if the appointment is later challenged.
Identifying prior and existing professional relationships
Before any enquiry letter goes out, the firm needs a full picture of who has previously advised the company, its directors, or connected entities. This should cover:
- Any current or former insolvency practitioner appointed to the company or a related company.
- The company's accountants, auditors and tax advisers.
- Any solicitor acting for the company, its directors, or major creditors.
- The referrer itself, and whether the firm has an existing commercial relationship with it.
Directors and referrers do not always volunteer this information unprompted, so the IP should ask directly rather than assume a clean history. Companies House filings, previous insolvency notices in The Gazette and the director's own disclosures are useful starting points.
Enquiries to make of the referrer and prior advisers
Once prior relationships are identified, the IP writes to each one — commonly called a "professional enquiry" or "clearance" letter — asking whether there is any professional reason why the appointment should not proceed. A typical enquiry covers:
- Whether the adviser has, or has had, any involvement that might amount to a conflict.
- Whether fees are owed to that adviser, and whether this affects their willingness to hand over records.
- Whether the adviser is aware of any facts that would be relevant to accepting the appointment.
- Confirmation that books, records and working papers will be released once appointed.
The same principle applies to the referrer. Where the referral comes with commercial terms — a fee, a panel arrangement, or a standing introduction agreement — the IP should record what those terms are and confirm they do not influence the decision to accept. This is a natural point to check Are Referral Fees Legal in the UK?, since fee transparency sits alongside clearance as part of showing the appointment was accepted properly.
Reasonable timeframes for a response
A short, reasonable deadline — typically five to seven working days — is standard practice. If a case is genuinely urgent, the IP can proceed with a documented risk assessment while awaiting a reply, provided the reasons for proceeding are recorded.
Spotting significant professional relationship issues
Not every prior relationship is a barrier to acceptance. The question is whether a reasonable and informed third party would consider the relationship a threat to the IP's objectivity. Signs that call for closer scrutiny include:
- The IP or firm has previously advised the directors personally, not just the company.
- A significant proportion of the firm's referral volume comes from the same introducer, creating a self-interest threat.
- The prior adviser flags unresolved fee disputes, missing records, or concerns about director conduct.
- The appointment follows a pre-pack sale where the same advisers were involved on both sides of the transaction.
Where an issue is identified, the firm should consider safeguards — such as an independent second partner reviewing the file — or decline the appointment. A useful reference point here is Conflict Checks on Referred Insolvency Work, since the same threats-and-safeguards approach applies.
Recording clearance and the decision to accept
Once enquiries are complete, the firm should keep a clear file note covering:
- Who was contacted, when, and what was asked.
- Any responses received, including a "no reply" outcome and how that was managed.
- Any threats identified and the safeguards applied, or the reasoning for proceeding without safeguards.
- Confirmation of the final decision to accept, signed off by the appointment-taker.
This record should sit on the permanent file alongside the engagement letter and any referral or commission disclosure. For firms building or reviewing their referral compliance more generally, Insolvency Code of Ethics: Referrals Explained sets out the wider framework that clearance sits within.
Frequently asked questions
Do I need clearance for a same-firm referral?
Yes. If the referral comes from within the same firm — for example, an internal handover between departments — the self-interest and familiarity threats can be greater, not smaller, so clearance and an independent review are still expected.
What if the prior adviser does not respond?
A non-response does not automatically bar acceptance, but the firm should record that it wrote, when, and what it did to reach a decision in the absence of a reply, including any further attempts made.
Does pre-pack work need extra clearance steps?
Pre-pack sales attract more scrutiny because of the connected-party element, so firms typically apply additional checks — including the disclosure and evaluation steps set out in the Insolvency Service's guidance on pre-pack sales in administration — alongside standard professional clearance.
How long should clearance take before accepting an appointment?
Most straightforward cases can be cleared within five to seven working days. Genuinely urgent matters can proceed on a documented risk basis, but the clearance process should still be completed and recorded.
Who is responsible for signing off clearance within the firm?
This is a firm-level decision, but it is good practice for someone other than the appointment-taker — such as a compliance partner — to review and sign off the clearance file before the appointment is confirmed.
This article is general information for insolvency practitioners and referral partners, not legal, regulatory or professional advice. Firms should apply their own professional judgement and consult their regulatory body or legal advisers on specific cases.
If you refer or receive introduced insolvency work and want to talk through how clearance fits your process, Harbourfirst can introduce you to a regulated insolvency specialist — start an enquiry.