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Assignment of Insolvency Claims and Alternative Funding Options

Assignment of Insolvency Claims and Alternative Funding Options

assignment of insolvency claims

In the complex landscape of financial transactions and business dealings, insolvency is an issue that demands careful consideration and resolution.

Whilst it is often the case that insolvency claims are pursued against former directors of the insolvent company or people connected to them, claims may also be assigned to another party, such as an interested party or litigation funding company, as a result of a lack of funds for an insolvency office holder to pursue them.

The Assignment of insolvency claims is a practice that involves the transfer of rights to pursue claims within an insolvency proceeding. This Assignment not only facilitates the distribution of assets amongst creditors but also assists with the financial strain of insolvency.

At Annecto Legal, we assist insolvency practitioners in meeting their obligations by providing advice and assistance on securing funding for insolvency cases. Our service is designed to ensure that any business or individual involved in insolvency or with the intention to Assign their claim has the correct support. We can approach multiple potential buyers of a claim to ensure value is maximised and office holders fulfil their duties.

What is the Assignment of insolvency claims?

The Assignment of insolvency claims refers to the transfer of the right to pursue a claim within an insolvency proceeding from one party to another.

In the context of insolvency, a claim typically represents a right to receive payment or some other form of relief from the assets of an insolvent debtor.

When a business or individual faces insolvency, there are often various claims against its assets by creditors seeking repayment. These claims could include outstanding debts, contractual obligations, or other legal entitlements.

In some instances, it may be in the best interests of the office holder to choose to Assign or transfer claims to other parties. This Assignment of the claim allows the Assignor to transfer their right to pursue the claim to a third party (Assignee) against the proposed defendant.

There are a number of firms in the market that will take Assignment over insolvency disputes. They will usually pay an upfront consideration, plus a share of recoveries after costs are deducted.

Office Holders can opt to assign claims as a strategic financial decision or a desire to exit the insolvency process as quickly as possible.

The Assignee, in turn, assumes the right to pursue the claim and would aim to receive a portion of the recovered assets from any litigation or negotiated settlement.

It is important to note that Assignment should not be made without testing the market. Doing so could be a breach of duty. Also, Assignment is not the only option for funding an insolvency claim, and parties could explore alternate options, such as third party funding and/or ATE insurance. 

Insolvency Practitioners have a duty under The Insolvency Act 1986 to secure the optimal financial result for creditors. If the Insolvency Practitioner has not taken legal advice and considered their options for the case, any Assignment could potentially be set aside.

Alternative insolvency litigation funding

If you are pursuing insolvency litigation, legal costs can escalate quickly. Therefore, it is essential that you are aware of the funding options that are available to you. IPs should fully explore their options to help them meet their obligations under the Insolvency Act 1986. Listed below are some of the cost-effective options for funding insolvency litigation.

  • Conditional fee agreements – Conditional fee agreements (CFAs), also known as ‘no win, no fee agreements’, are a type of funding arrangement that allows individuals to pursue a claim without paying legal fees upfront. Under a no win no fee basis, the law firm agrees to take on the case and only charges a fee if the case is successful. If the case is unsuccessful, the client does not have to pay these legal fees.
  • Contingency fee agreement – Some insolvency litigation solicitors may offer to take on an insolvency dispute claim on a contingency fee basis, which means that they will only charge a fee if they are successful in securing a financial settlement or damages. The fee payable to the solicitor is usually a percentage of the amount recovered, and if the case is unsuccessful, the law firm will not charge a fee.
  • Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for an insolvency dispute claim in exchange for a percentage of any financial settlement or damages awarded. This option can be attractive for individuals who cannot afford to pay for legal fees themselves but have a strong case. ATE insurance is often used in conjunction with this type of funding.
  • After the event insurance – After the event (ATE) insurance is a type of insurance that can provide cover for legal costs in the event that a case is unsuccessful. This option can be particularly useful in cases where the outcome is uncertain, and the costs of losing a case could be significant. ATE insurance is often used alongside conditional fee agreements and contingency fee agreements. ATE can also be used to meet some expenses, such as court fees, in a cost-effective manner (as an alternative to funding or assignment).

How can Annecto Legal assist?

At Annecto Legal, we assist a wide range of clients in finding the appropriate insolvency litigation funding and insurance. We can help you find the right guidance on the Assignment of insolvency claims and alternative funding options.

Annecto Legal regularly assists licensed insolvency practitioners and Liquidators who are involved in the administration of or liquidation of a company, as well as Trustees in Bankruptcy.

If you are in the process of pursuing or defending an insolvency dispute and want to find out whether we can assist in helping you fulfil your obligations and secure the right deal, then contact Annecto Legal now.

Get in touch

* Annecto Legal can only assist on case where the loss is in excess of £100,000, with the exception of data breach claims. If you need assistance on a claim worth over £100,000, please get in touch using our form or the details below:

Registered Office

Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS

Phone

0800 612 6587

Email

info@annectolegal.co.uk

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