On 1 April 2013 significant civil litigation reforms came into force following a review by Lord Justice Jackson. The reforms limited the recoverability of success fees and insurance premiums under Conditional Fee Agreements entered into on or after 1 April 2013 save for in excepted cases. Insolvency related proceedings are one of the excepted cases; however, the exemption is set to expire in April 2015. The Government recently announced that it does not propose to extend the exemption.

This will be disappointing news for insolvency practitioners who regularly undertake litigation on behalf of creditors against company directors or third parties whose actions have contributed to a company’s failure. The current exemption allows insolvency practitioners to engage solicitors under Conditional Fee Agreements so that the costs of litigation do not need to be borne by the insolvency estate, enabling the insolvency practitioner to maximise the assets available for distribution to creditors. The inability to recover success fees and insurance premiums after April 2015 will reduce the funding options available to insolvency practitioners.

Insolvency practitioners who regularly undertake litigation on behalf of creditors would be well advised to contact their solicitors and discuss alternative funding options before the exemption expires.

If you would be interesting in discussing alternative funding options for insolvency related proceedings with Druces LLP, please contact Julian Johnstone, Charles Spragge or Rachel Brown in Druces LLP’s Commercial Litigation Department.