Ticking Time Bomb for Insolvency Proceedings


Geoff Cunningham

The Government recently confirmed that it has no plans to extend the insolvency exemption to the Legal Aid Sentencing and Punishment of Offenders Act 2012 (“LASPO”).


Earlier this year, R3 (Association of Business Recovery Specialists) wrote at great length on the losses creditors may face if the exemption came to an end.  Nevertheless, Justice Minister Shailesh Vara confirmed the impact of LASPO reforms published in 2011 and that the government had not moved away from this position.

The LASPO reforms had the following effect in civil litigation:

  1. Section 44 removed the recoverability of success fees in Conditional Fee Agreements (CFA’s); and
  1. Section 46 abolished the recoverability of after the event (ATE) insurance premiums.

Therefore, insolvency proceedings will only be exempt from Section 44 and Section 46 LASPO until April 2015.

Insolvency Practitioners should be alive to the imminent removal of this exemption, notwithstanding the persistent lobbying within the insolvency industry.

Geoff Cunningham
Commercial Dispute Resolution Department
0113 2279360

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