The code of ethics for insolvency practitioners

The Insolvency and Receivership Service within the Malta Business Registry (MBR) has introduced a new Code of Ethics and Professional Conduct for Insolvency Practitioners, alongside a parallel drive to promote specialisation and higher professional standards in the insolvency field. These initiatives aim to ensure that those handling insolvent company liquidations and rescues in Malta do so with integrity, objectivity and accountability. By formalising ethical duties and requiring dedicated training and authorisation, the reforms seek to protect creditors and debtors, prevent abuses, and reinforce confidence in Malta’s business environment.

Mikael Grima

The newly published Code of Ethics sets clear requirements for the professional conduct of insolvency practitioners. Its goal is to safeguard the profession’s standing through a uniform set of rules that define practitioners’ duties and obligations to meet high ethical standards. The Code applies to all authorised insolvency practitioners – those licensed under Malta’s insolvency laws – and is intended to ensure they do not act abusively or negligently, while upholding the dignity of their profession and the trust placed in them.

The Code lays down five fundamental ethical principles for insolvency practitioners, namely integrity, requiring practitioners to be straightforward and honest in all professional and business relationships; objectivity, ensuring that professional judgment is not compromised by bias, conflicts of interest or undue influence; professional competence and due care, obliging practitioners to maintain the necessary knowledge and skill and to act diligently in accordance with applicable technical standards and legislation; confidentiality, requiring respect for information acquired through professional engagements; and professional behaviour, mandating compliance with laws and regulations and the avoidance of any conduct that could discredit the profession.

Beyond these principles, the code provides further guidance. It explicitly forbids practitioners from accepting an engagement if a conflict of interest exists or is likely to. Practitioners must administer insolvency estates with prudent care and refrain from deriving any personal benefit from assets under their control. They are also required to maintain complete records of their actions and provide timely reports to creditors, courts and regulators. Additionally, practitioners must cooperate with any official investigations or audits related to the proceedings.

Accredited insolvency practitioners must also maintain high professional standards

The Code of Ethics itself is four tiered, each addressing a different layer of professional responsibility. The first focuses on the general conduct expected of insolvency practitioners, setting the ethical foundation for all actions taken. The second deals with the practical application of those principles in day-to-day insolvency work, including appointments, conflicts and handling of assets. A third part governs relations with creditors, debtors and fellow practitioners, while the final section addresses anti-money laundering and counter-terrorism financing obligations, further showcasing the broader regulatory environment in which insolvency work now operates.

This Code is part of a broader effort to professionalise the sector. In 2022, Malta’s Insolvency Practitioners Act introduced a formal licensing procedure, requiring that only authorised professionals can act as insolvency practitioners and the MBR’s Insolvency and Receivership Service was set up as the competent authority to license and supervise practitioners under the new law.

To build a structure of qualified experts, the MBR provides highly specialised training for aspiring insolvency practitioners. This program provides in-depth training on Malta’s insolvency framework and practical case management. After completing the course, candidates are assessed and those who meet the legal requirements are granted authorisation to practice as licensed insolvency practitioners.

Accredited insolvency practitioners must also maintain high professional standards. The code requires ongoing education – at least 10 hours of training every two years – to keep skills up to date. To enforce the rules, the competent authority can investigate and discipline practitioners who breach their obligations. Sanctions range from warnings and fines up to suspension or revocation of a licence, with serious misconduct potentially leading to loss of authorisation and legal proceedings.

A further significant feature of the new framework is the weight placed on consistency and predictability in insolvency proceedings, particularly in areas involving oversight and stakeholder communication. By standardising expectations around conduct, record-keeping and reporting, the Code supports a more consistent approach across different insolvency appointments, regardless of their scale or complexity. Clear professional standards also provide stakeholders with an understanding of what can properly be expected from practitioners throughout the process thereby contributing to a boost in confidence.

Viewed as a whole, the introduction of the Code of Ethics, together with the licensing and training framework introduced in recent years, reflects a deliberate effort to bring greater structure and coherence to insolvency practice and corporate rescue in Malta. Rather than treating ethics, competence and oversight as separate concerns, the framework links them directly to the way insolvency work is carried out in practice. By doing so, it clarifies professional expectations, strengthens accountability, and supports a more consistent approach to the administration of entities at the brink of insolvency, within a legal and supervisory environment that is now more clearly defined.

Dr Mikael Grima LLB (Hons)(Melit), M.Adv (Melit), Insolvency and Receivership Service within the Malta Business Registry