Ways in which an insolvency practitioner can fund litigation and investigations where there are no assets in the estate
Produced in partnership with Mark Sands of Opus Business Advisory Group
Practice notesWays in which an insolvency practitioner can fund litigation and investigations where there are no assets in the estate
Produced in partnership with Mark Sands of Opus Business Advisory Group
Practice notes
This Practice Note discusses:
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funding concerns for Insolvency practitioners
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evolution of litigation funding
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the costs that different funding methods cover
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general litigation funding methods
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insolvency-specific funding methods
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key considerations for IPs when using litigation funding
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liability for opponent cost issues
Funding concerns for insolvency practitioners
Insolvency practitioners (IPs) have a duty to maximise recoveries for creditors of an insolvent entity and existing or prospective claims are key assets of the Insolvent estate. IPs have a duty to deal with claims of the insolvency Estate (or at least consider whether they are going to pursue the potential claims).
Investigations and litigation can be expensive, however, and inherently have uncertain outcomes. The following matters must be planned for:
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the costs of the IP’s lawyers (both solicitors and counsel)
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the costs of disbursements, such as court fees and expert reports
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the likely requirement of security for costs. Under CPR 25,
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Jurisdiction(s):
United Kingdom
Key definition:
Insolvency definition
What does Insolvency mean?
This can be defined by two alternative tests (Insolvency Act 1986, s 123):
• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);
• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.
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