The Perils of April 2015 for Insolvency Litigation Cases

  • Insolvency

The government has indicated that April 2015 will see the end of the recoverability of success fees and after the event (ATE) insurance premiums from the losing opponent as part of the costs ordered on the successful result of insolvency litigation.  Crucially, any award of damages where funding arrangements are entered into after 1 April 2015 will be reduced by the success fee and ATE premium.  Insolvency Practitioners will not be affected by these changes provided that funding arrangements have been entered into prior to 1 April 2015.

With April 2015 fast approaching, time pressures are escalating for Insolvency Practitioners.  Allowance for insurers considering policy proposals should be taken into account as frequently insurers will require proposals to include Advice from Counsel as to the merits of a case.  Investigations under sections 235 and 236 of the Insolvency Act 1986 for corporate insolvency cases (see our previous blog) and section 366 of the Insolvency Act 1986 for personal insolvency cases can be prolonged due to contested applications.  Enquiries and applications under these sections should be commenced promptly to ensure that such cases involving recovery of property take advantage of the current funding arrangements.  Accordingly, preparatory steps must be taken sooner rather than later.

It is clear that many cases will not be pursued after the looming deadline due to the lack of viable funding and reduced award to the winning party.  In light of the above, Insolvency Practitioners should act now in order to benefit from the current funding arrangements.

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