In a ministerial statement published on 17 December 2015, the Ministry of Justice has announced that the reforms to litigation funding in relation to insolvency proceedings will now be implemented.
Where proceedings are brought by liquidators, administrators and trustees in bankruptcy to recover the assets of the insolvent estate, success fees in conditional fee agreements and after the event insurance premiums will no longer be recoverable.
The exemption was initially due to end in April 2015, however, the government gave insolvency practitioners more time to prepare for and adapt to the changes in funding.
Despite reports that the insolvency exemption provides HMRC with an estimated £115 million each year and high profile campaigns by R3, ICAEW and the Federation of Small Businesses, the government has decided to implement the changes in any event.
We are looking closely at how we develop workable funding solutions to allow insolvency practitioners to continue to bring insolvency proceedings for the right cases from May 2016. In the meantime, we recommend that where office holders wish to benefit from a CFA and recover any ATE insurance premium from a defendant, that they now take prompt steps to obtain insurance and institute proceedings in the early part of 2016.