This article provides an essential update for insolvency practitioners on the proposed Insolvency Rules 2015 and the end of the insolvency exemption on Conditional Fee Agreements.
The end of the CFA?
From 1 April 2015, the insolvency profession will no longer be under the current exemption to the reforms to litigation funding which were introduced in April 2013 by the Legal Aid, Sentencing and Punishment of Offenders Act 2012. As such success fees on Conditional Fee Agreements and premiums on After The Event insurance will no longer be recoverable from the Defendant/s in successful insolvency claims brought by insolvency office holders. It is anticipated that this will have a significant impact on insolvency practitioners ability to bring claims due to lack of funding and thereby reduce the net recoveries available for distribution to creditors. Despite lobbying by the insolvency industry, the government has indicated that it has no intention to extend the exemption. We therefore urge you to contact Suzanne Brooker or Hannah Wright at Pitmans LLP if you have a case where proceedings are likely and as such beneficial to consider a Conditional Fee Agreement and After The Event Insurance now to avoid losing the benefit of the current exemption.
The draft Insolvency Rules 2015
Last year we published ‘Are you ready for 2015 Insolvency Changes? – Part 1’, regarding The Insolvency Rules 1986 (“IR 1986”) which are to be replaced in their entirety by the Insolvency Rules 2015 (“IR 2015”). It was anticipated that the final draft of the new rules would be available shortly after October 2014. However, now the draft rules are to be being sent to the Insolvency Rules Committee in Spring 2015 with the final rules being laid before Parliament in October 2015. The Insolvency Service have confirmed that they do not think the new timetable will be adversely affected by the forthcoming general election. If this new timetable is achieved, it is likely that the new rules will be effective from April 2016.
The first draft IR 2015 (published in September 2013) made clear that the insolvency profession will need to get to grips with a number of changes as well as a substantially different order to that currently contained in IR 1986. We hope to be able to publish Part 2 of our article before the end of 2015, but the more appropriate question looks likely to be are you ready for 2016 Insolvency changes?