In a ministerial statement published on 17 December 2015, the government announced that the reforms to litigation funding in relation to insolvency proceedings will come into force in April 2016.

Proceedings brought by liquidators, administrators and trustees in bankruptcy to recover the assets of the insolvent estate will no longer be excluded from the effect of:

  • Section 44 of Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) which removed the recoverability of success fees in conditional fee agreements (CFA’s).
  • Section 46 of LASPO which abolished the recoverability of after the event (“ATE”) insurance premiums.

The insolvency exemption, provided by Article 4, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, was due to expire in April 2015. In February 2015, following heavy lobbying from insolvency professionals, the government announced an indefinite delay to its expiry.

The government also confirmed that there will be a post implementation review of the LASPO reforms towards the end of the period between April 2016 and April 2018.

R3 announced that they were disappointed with the government’s decision to remove the insolvency exemption. Without it, R3 stated that insolvency litigation will be difficult to fund: there is often no money available for insolvency officeholders to litigate for recovery and, now, no ability to reclaim their costs.

For further information about the funding reforms or for any insolvency queries please contact Lauren Hartigan-Pritchard on 01905 677051 or lhartiganpritchard@thursfields.co.uk

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