Insolvency and Bankruptcy - Law and Practice · Professional and Ethical Practices for Insolvency Practitioners

Code of Conduct for Insolvency Professionals under the IBC

Updated 11 October 2026 · Fact-checked

The code of conduct for insolvency professionals is the set of professional and ethical standards they must follow while acting under the IBC. It covers integrity, independence, impartiality, confidentiality, competence and disclosure. To answer a question, identify the conduct, match it to the standard breached, and state the consequence.

Understand Code of Conduct for Insolvency Professionals

An insolvency professional (IP) handles other people's money and rights. Creditors, the debtor and employees all rely on the IP to act fairly. The code of conduct turns that trust into rules.

The Code itself builds the frame. Under section 204, an insolvency professional agency (IPA) must lay down standards of professional conduct for its members, monitor their performance, and suspend or cancel membership on grounds in its bye-laws. Under section 196, the Board (IBBI) can specify standards for IPs and IPAs, issue guidelines, and pass orders on complaints. Section 196(2)(b) lets the Board put standards for professional and ethical conduct into model bye-laws. The detailed conduct rules sit in the IBBI regulations and the IPA bye-laws, not in the sections quoted here.

The core standards are easy to remember as themes:

Integrity: be honest and straightforward; do not misstate facts or hide material information.
Independence and impartiality: do not let personal interest or a relationship with any party influence your decisions. Treat all stakeholders fairly.
Confidentiality: do not misuse or leak information gained in the assignment, except where law requires disclosure.
Professional competence: take up only work you can do properly, and keep your knowledge current.
Disclosure: disclose any conflict of interest or relationship that could affect your independence.

Before any of this applies, the person must be eligible to act. Section 206 says no one may render services as an IP without being enrolled with an IPA and registered with the Board. Section 207 requires registration with the Board after getting IPA membership. Acting without both is itself a breach.

Breach has consequences. The IPA can discipline its members, and the Board can inspect, investigate under section 218, and pass orders, including suspending or cancelling registration under section 196(1)(a).

Key rules to remember

No practice without enrolment and registration: IP services = IPA membership + Board registration (s. 206, s. 207); Both are needed. Membership alone is not enough.
IPA duty on conduct: IPA: lay down conduct standards, monitor members, suspend or cancel membership on bye-law grounds (s. 204); Also redresses grievances of consumers against its members.
Board powers over IPs: Board: register, specify standards, inspect, investigate, direct, decide complaints (s. 196); Board can also suspend or cancel registration.
Investigation trigger: Complaint or reasonable grounds of contravention → written order appointing investigating authority (s. 218); The investigating authority submits a detailed report to the Board.
Core conduct standards: Integrity, independence, impartiality, confidentiality, competence, disclosure; Use as a checklist to tag each fact in a case.

How to solve Code of Conduct for Insolvency Professionals questions

Case questions ask whether an IP acted properly. Use a provision, facts, conclusion structure.

1Read the facts and list every act or relationship of the IP.
2Check eligibility first: is the person enrolled with an IPA and registered with the Board (ss. 206, 207)?
3Tag each act to a standard: integrity, independence, impartiality, confidentiality, competence or disclosure.
4State the rule in plain words, naming the Code section only where sure, and the IBBI regulations or IPA bye-laws for the detailed conduct rule.
5Apply the rule to the facts. Say what a reasonable stakeholder would see as a conflict or misuse.
6Name the consequence: IPA disciplinary action under s. 204, or Board inspection, investigation and orders under ss. 196 and 218.
7Conclude clearly and add the practical step: disclose, recuse, or withdraw from the assignment.

Quickest way: Six-word checklist

When to use it: When you have under ten minutes for a conduct question.

Write the six tags: integrity, independence, impartiality, confidentiality, competence, disclosure.
Strike through the tags the facts touch.
Write one line per tag: rule, then fact.
Close with who can act: the IPA (s. 204) and the Board (ss. 196, 218).
Add one practical remedy such as disclosure or recusal.

Common mistakes in Code of Conduct for Insolvency Professionals

Treating IPA membership as enough to practise
Students remember enrolment but forget registration.
Fix: Quote s. 206: enrolled with an IPA and registered with the Board. Both are required.
Mixing up the roles of the IPA and the Board
Both can discipline, so roles blur.
Fix: IPA lays down standards and monitors members under s. 204. The Board registers, regulates and investigates under ss. 196 and 218.
Confusing independence with impartiality
They sound alike.
Fix: Independence means no conflicting interest or relationship. Impartiality means fair treatment of every stakeholder in decisions.
Citing section numbers for specific conduct rules
Students guess regulation numbers.
Fix: Cite only sections you are sure of. Otherwise say the IBBI regulations and the IPA code of conduct.
Stopping at 'breach' without a conclusion
Students describe the facts but skip the consequence.
Fix: Always end with the likely action and the practical corrective step.

Worked examples

Example 1

Rakesh Menon, an insolvency professional, is appointed in a corporate insolvency matter. He had earlier advised a major creditor of the company on a separate matter and does not tell the other creditors. Discuss whether his conduct is proper.

Show the solution

Eligibility: assume Rakesh is enrolled with an IPA and registered with the Board, as ss. 206 and 207 require.
Standards touched: independence, impartiality and disclosure.
Rule: an IP must not act where a relationship could affect independent judgement, and must disclose any such relationship.
Application: his earlier advice to a major creditor is a relationship that could make others doubt his independence. Non-disclosure to other creditors deepens the problem.
Consequence: a complaint can lead to action by his IPA under s. 204, or Board inspection and investigation under ss. 196 and 218.
Practical step: he should have disclosed the relationship and, if it compromised independence, declined the assignment.

Answer: His conduct is improper. He breached independence, impartiality and the duty of disclosure. He may face IPA disciplinary action and Board investigation, and should have disclosed or declined.

Example 2

Anita Rao, a registered IP, shares confidential financial information of the corporate debtor with a bidder who is a family friend. Which standards are breached and who can act?

Show the solution

Identify facts: confidential information gained in the assignment was passed to one bidder.
Standard 1: confidentiality, since information was disclosed outside what the law permits.
Standard 2: integrity and impartiality, since one bidder was favoured over others.
Possible action by the IPA: it can monitor, and suspend or cancel membership on its bye-law grounds (s. 204(c), (e)).
Possible action by the Board: on complaint or reasonable grounds it can order an investigation under s. 218 and pass orders under s. 196, including on registration.
Conclude and recommend: she should have kept the information confidential and treated all bidders equally.

Answer: Anita breached confidentiality, integrity and impartiality. Her IPA and the Board can both act, which may include suspension or cancellation of membership or registration.

Exam tips

Write the six standards as a list at the start of the answer, then apply each to the facts.
Name both authorities: the IPA under s. 204 and the Board under s. 196. Examiners reward the correct split.
Cite only sections you are sure of. For detailed conduct rules, say IBBI regulations and the IPA code of conduct.
Always finish with a conclusion and a practical step such as disclosure or recusal.
In open-book electives, tab ss. 196, 204, 206, 207 and 218 for quick reference.

Practice questions from Professional and Ethical Practices for Insolvency Practitioners

Code of Conduct for Insolvency Professionals in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Code of Conduct for Insolvency Professionals: frequently asked questions

Who lays down the code of conduct for insolvency professionals?

The IPA must lay down standards of professional conduct for its members under section 204. The Board can specify standards and include ethical conduct in model bye-laws under section 196. The detailed rules are in the IBBI regulations and IPA bye-laws.

Can a person act as an insolvency professional with only IPA membership?

No. Section 206 says no person can render services as an IP without being enrolled with an IPA and registered with the Board. Section 207 requires registration with the Board after obtaining membership.

What happens if an IP breaches the code of conduct?

The IPA can suspend or cancel membership on grounds in its bye-laws. The Board can inspect, investigate and pass orders, including on registration. An investigation can start on a complaint or on reasonable grounds under section 218.

What is the difference between independence and impartiality?

Independence means having no interest or relationship that could affect your judgement. Impartiality means treating all stakeholders fairly when you decide. A case can breach one without the other.