Code of Conduct for Insolvency Professionals
Twenty-nine numbered clauses, but a handful decide most ethics questions. Here they are, with the thresholds that trip people up.
Section 208(2) of the Code gives every insolvency professional a short statutory code: take reasonable care, follow the IPA's bye-laws, let the IPA inspect records, file records of proceedings with IBBI and the IPA, and perform functions as specified. The detail sits in the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016, which regulation 7(2)(h) makes a condition of registration.
The Schedule is organised under ten headings, from integrity and independence to gifts and hospitality. In the Limited Insolvency Examination it carries a dedicated ethics case study, and its clauses also decide facts inside the CIRP and liquidation cases.
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The Clauses That Decide Most Fact Patterns
| Clause | Rule |
|---|---|
| 3A | Disclose any conflict of interest to stakeholders whenever it arises during an assignment |
| 4 | An IRP, RP, liquidator or bankruptcy trustee should not acquire any of the debtor's assets, directly or indirectly, nor knowingly permit a relative to do so |
| 6 | In liquidation or bankruptcy, the IP and relatives must not knowingly acquire the debtor's assets unless there was no impairment of objectivity, independence or impartiality and the required prior approval was obtained |
| 7 | Do not take an assignment if you, a relative, your IPE or its partners or directors are not independent of the debtor and its related parties |
| 8A, 8B | Disclose past employment with, or empanelment by, a financial creditor; disclose relationships with the debtor, appointed professionals, financial creditors, interim finance providers and resolution applicants to the IPA within three days of the triggering event |
| 17 | No private communication with stakeholders unless the Code, regulations or the NCLT require it |
| 22A | Resignation needs the CoC's recommendation (in CIRP) and the NCLT's approval; duties continue until approved |
| 23 | No employment while holding a valid authorisation for assignment or while on an assignment |
| 23A | For one year after a CIRP ends: no employment (except through open competitive recruitment) and no non-Code professional services, for you or relatives, with a creditor holding more than 10% of votes, the successful resolution applicant, the corporate debtor, or their related parties |
| 23B, 23C | Do not engage relatives or related parties for work on your assignment, and do not provide services on an assignment they are running |
| 25B, 26, 26A | Bill in your own name through banking channels; take no fee not disclosed to and approved by those fixing it; take or share no fee from professionals appointed in the process |
| 27B | Penalties or losses from failing to keep the debtor compliant cannot go into CIRP or liquidation costs |
| 28 | Neither you nor a relative may accept gifts or hospitality that undermine independence |
What Counts as a "Relationship" for Clauses 8B and 8C
Any of four kinds, at any time or in the three years before the appointment.
- Kind A
- The IP or other professional derived 5% or more of gross revenue in a year from professional services to the related party.
- Kind B
- The IP or other professional is a shareholder, director, key managerial personnel or partner of the related party.
- Kind C
- A relative (spouse, parents, parents of spouse, siblings of self and spouse, and children) has a Kind A or Kind B relationship.
- Kind D
- Where the IP or professional is a partner or director of a firm, company or LLP, every partner or director's Kind A, B or C relationship counts.
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Two Changes After the Exam Cut-Off
Answer from the 4 February 2025 version. (1) Clause 6: at the cut-off, an IP or relative could acquire liquidation or bankruptcy assets only with "the approval of the Board"; since 20 November 2025 it is "the prior approval of the Adjudicating Authority". (2) Assignment limit: at the cut-off, a clarification under clause 22 capped an IP at ten assignments as RP in CIRPs, no more than three with admitted claims above ₹1,000 crore each. Since 20 November 2025 that clarification is gone and regulation 7B applies the same ten-and-three cap to IRP, RP and liquidator assignments combined.
How the Limited Insolvency Examination Tests This
Ethics questions give you an IP's conduct and ask which clause it breaches, or whether it breaches any. Take an IP who ran the CIRP of a steel company. Eight months after the process ends, the successful resolution applicant offers her a consultancy retainer: clause 23A bars it until a year has passed. A bank that held 12% of the CoC's votes later hires her through an open competitive recruitment: the same clause allows it.
The traps are in the exceptions and thresholds. More than 10% voting power, not 10% or more. One year from cessation, not from plan approval. Open competitive recruitment saves employment, not professional services. And clause 23B's bar on engaging relatives has a carve-out only for an insolvency professional entity engaging its own partners or directors, and even then not for valuation or audit work.
After the cut-off, IBBI's circular of 9 September 2026 also requires an IP who forms a reasonable view that a process is being misused (for example, by a single non-bank creditor that bought the debt shortly before initiation and dominates the CoC) to apply to the NCLT.
FAQs
Where is the code of conduct for insolvency professionals?expand_more
In the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016. Regulation 7(2)(h) makes compliance a condition of registration, and section 208(2) of the Code sets out the core duties.
Can an insolvency professional work for the resolution applicant after the CIRP?expand_more
Not within one year of ceasing to be the IP in that process. Clause 23A bars employment (other than through open competitive recruitment) and non-Code professional services with the successful resolution applicant, the corporate debtor, any creditor with more than 10% voting power, or their related parties.
How many assignments can an insolvency professional hold?expand_more
Under regulation 7B, from 20 November 2025, no more than ten as IRP, RP and liquidator combined, of which no more than three may have admitted claims above ₹1,000 crore each. At the exam cut-off the cap applied only to RP assignments in CIRPs.
Can an insolvency professional resign from a CIRP?expand_more
Yes, under clause 22A, on the recommendation of the CoC and with the NCLT's approval. The IP keeps performing every duty until the NCLT approves the resignation.
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