Funding of insolvency litigation and investigations

When an insolvency office-holder is appointed over an insolvent estate, there is a need to commence litigation and there are no or limited assets in the estate the following matters will need to be carefully considered:

  1. how the costs of their lawyers (both solicitors and counsel) and any disbursements (such as court fees and expert reports) are going to be funded

  2. the likely requirement for security for costs to protect a defendant against the risk of successfully defending the litigation and being unable to recover their fees from the insolvent estate

  3. the payment of any adverse costs orders made against them and/or the insolvent estate if the litigation is unsuccessful

The above risks can be dealt with by a variety of litigation funding tools, including:

  1. conditional fee agreements

  2. damages based agreements

  3. third party funding

  4. insolvency-specific funding methods

  5. after the event insurance

Conditional fee agreements

A conditional fee agreement (CFA) is an agreement for the provision of litigation services with a solicitor and/or barrister where a percentage of the fees charged are contingent on the

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Powered by Lexis+®
Latest Restructuring & Insolvency News

Rational FX—court sanctions distribution plan amid regulatory uncertainty (Kicks and another v MLS-Multinational Logistics Services Ltd (a company incorporated in Malta))

Restructuring & Insolvency analysis: On the 28 July 2025, the court approved a distribution plan in the special administration of Rational Foreign Exchange Ltd (RFX), enabling the joint special administrators (Kristina Kicks and Edward Boyle of Interpath) (Special Administrators) to return safeguarded funds to customers. The Special Administrators also sought declaratory relief regarding the status of European domiciled customers, following the repeal of passporting rights under the Payment Services Regulations 2017 (PSR 2017) post-Brexit. RFX employed various methods to continue servicing European clients, some lacking proper regulatory basis. This required the Special Administrators to determine whether such clients were customers of RFX or separate European entities. This was a key issue given the shortfall in safeguarded funds available for distribution. The court granted the relief sought by the Special Administrators and set out guidance to assist in clarifying customer status. This case marks only the second reported judgment approving a distribution plan in respect of a payment services firm under rule 114 of the Payment and Electronic Money Institution Insolvency Regulations 2021 (2021 Regulations), and the first involving European domiciled business and a significant shortfall in safeguarded funds. In absence of specific guidance under the 2021 Regulations and the Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021 (2021 Rules), the court applied among other things the three-stage test from Re SVS Securities Plc assessing; (i) fairness and reasonableness of the proposed distribution; (ii) progress of the special administration; and (iii) adequacy of stakeholder engagement. Written by Brian Rostron, associate and Kelvin Riley, associate at Addleshaw Goddard LLP.

View Restructuring & Insolvency by content type :

Popular documents