Thursday, 19 February 2015

Assignment of Administrators’/Liquidators’ Causes of Action

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015
A majority of all professionals in the insolvency market will be fully aware of recent civil litigation changes which lead to a prohibition on Claimants from recovering their legal costs which had been incurred in proceedings on the basis of a Conditional Fee Agreements (where solicitor’s fees were payable on a “no win no fee” basis) usually combined with After the Event Insurance premiums (which insure against an opponent’s legal costs).
Proceedings arising from insolvent situations (usually claims by appointed Liquidators or Administrators) were granted an exemption from these changes until April 2015, during which time government has been in consultation as to the effect of such changes.
However, it has now been announced that this extension will not continue from April 2015.
This leads to a considerable difficulty – where companies placed into liquidation or administration have no assets to fund a claim against the former directors or third parties there is little other option (unless creditors are happy to fund such proceedings) to seek recovery of assets that should form part of the company’s estate.
The Bill has however provided assistance to this problem at Section 106 where it provides the power for appointed Liquidators and Administrators to assign a cause of action under certain categories of claim that historically could only be issued by an appointed Liquidator or Administrator.
Further, all such claims cannot be repaid to holders of fixed or floating charges over the company but rather will fall to a pool of assets to be distributed to unsecured creditors. This is obviously good for creditors but also means that the likelihood of an appointed Administrator/Liquidator being funded to take such proceedings will diminish.
These proposals have also led to changes in the marketplace where insurance companies increasingly have demonstrated an appetite to acquire company claims and the expansion of this to claims by Liquidators and Administrators will no doubt also prove attractive to them.
At Francis Wilks & Jones we deal with such insurers and their brokers and can facilitate the necessary introduction and take you through the appropriate steps in the litigation proceedings to support such recovery action.