Counting the Costs of Insolvency

Dispute Resolution Article

23 December, 2015

In changes proposed by the Government in its efforts to reduce litigation costs, creditors could lose out to unscrupulous rogue company directors. The Government is proposing to abolish the recoverability of Conditional Fee Agreement (CFA) success fees and associated 'After The Event' (ATE) premiums which could mean that bringing a claim against the director of an insolvent company could become substantially more expensive. The changes are expected to come into force in April 2016.

Under the current system, creditors and the Insolvency Practitioners (IPs) who represent them, can recover CFA success fees and ATE premiums if successful in Court proceedings against the directors of insolvent companies for a range of actions such as fraudulent trading and disposing of company assets at an undervalue.

The proposed changes would mean that these fees would no longer be recoverable from the Defendant company directors, and therefore the creditors/IPs would have to bear greater fees in relation to taking legal action. This will have the obvious knock on effect of making potential insolvency litigation a less attractive and more risky option for many creditors, particularly small businesses who may potentially as a result be resigned to writing off substantial debts which could really impact cash flow.

The advice on this matter is that obtaining the right legal advice and assistance is crucial and could be the key to minimising the costs of recovering monies owed following insolvency. Forbes Solicitors have expertise in helping businesses big and small in insolvency matters.

If you are looking for any more information with regards to our services view our Dispute Resolution section. You can also contact Michael Rutter in our Dispute Resolution department via email or phone on 01254 222340. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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