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Insolvency exception to the Jackson Reforms set to expire in 2015

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In January 2013, The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (the “Act”) came into force.

Section 44 of the Act removed the recoverability of success fees in conditional fee agreements (CFAs) from the losing party in litigation. Insolvency litigation was however exempted from these provisions until April 2015. Section 46 of the Act abolished the recoverability of after the event (ATE) insurance premiums.

Insolvency practitioners have continued to argue that if these reforms applied to insolvency litigation this would severely restrict the ability of insolvency practitioners to bring proceedings and reduce the net recoveries available for distribution to creditors.

It was hoped by the insolvency industry that the exemption for insolvency litigation would remain however it is now evident that the government does not intend to lengthen the period of the insolvency exemption in relation to litigation funding under the Act. Insolvency Practitioners will only be exempt from the provisions of the Act until April 2015. Insolvency Practitioners should therefore be mindful that they need to bring any potential claims before April 2015 to avail themselves of the current exemption.

If you have any questions please contact one of the corporate recovery solicitors on 0113 336 3426.

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