The Small Business, Enterprise and Employment Bill, which is currently at the Committee Stage in the House of Lords, looks set to introduce a number of measures affecting the Companies Act 2006, the Directors Disqualification Act 1986 and the Insolvency Act 1986. The government believes that, among other things, these should help to "streamline insolvency law to remove unnecessary costs and ensure effective oversight of insolvency practitioners".

Of particular interest to insolvency practitioners will be two new measures affecting the pursuit of claims under the Insolvency Act 1986. These include claims against individuals or companies for fraudulent trading, transactions at undervalue and transactions defrauding creditors.

First is the proposal to remove the need for the liquidator to obtain sanction, either from the company's creditors or the court, to pursue such claims in the case of a voluntary winding up. This will make it easier for the liquidator to bring a claim and should save costs, especially where an application to court would otherwise be required.

The second and more wide reaching proposal, however, is a proposal for a new power for the liquidator to assign their right of action in respect of such claims. This will allow the claim to be brought in the name of a third party. It is not yet clear how this power would work in practice, but this could be a useful consideration where, in particular, the claim is not straightforward, or the liquidator remains unfunded. These assignments could create a whole new market for such claims, and provide insolvency practitioners with further means of recovering assets into the estate with less risk. It also goes a little way to alleviate the issues caused by the removal of the insolvency exemption to recovering CFA uplifts and after the event insurance premiums from defendants after April 2015.

Next Steps

  • Review (now) your caseload for potential claims well before the insolvency exemption is removed, and whilst CFAs and ATE premiums are still recoverable.
  • When considering the options to fund or proceed with insolvency litigation, and in addition to the options of litigation funding and assigning claims brought by the Company as opposed to the office holder, consider whether the assignment of an office holder claim is appropriate if these proposals are made law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.