Justice committee fails to exempt insolvency from legal reforms

INSOLVENCY PROFESSIONALS will not be exempt from current plans to clampdown on no-win no-fee claims.

Changes to legislation will mean insolvency practitioners pursuing funds from fraudulent directors on behalf of creditors will incur higher costs.

Earlier this week the Justice Bill Committee said it would not make any exemptions for practitioners despite petitioning from insolvency trade body R3.

Trade body president Frances Coulson (pictured) said: "Insolvency practitioners use ‘non-win' ‘no-fee' arrangements to recoup money back from ‘dodgy' directors, who in many cases have taken money from small businesses and HM Revenue & Customs.

"R3 is calling for the government to exempt insolvency litigation, so that taxpayers are not left out of pocket."

In an analysis by R3, consisting of 23 case studies, it found returns to creditors could reduce by as much as £3.6m - from insolvency practitioners not pursuing claims and reduced returns.

The change to the Legal Aid Sentencing and Punishment of Offender Bill will force current fees such as success and after the event insurance to be paid by the winning side, eating into returns for creditors.

Currently if an insolvency practitioner wins a case under the no-win no fee rules all fees are paid by the losing party.

An R3 spokeswoman said the insolvency trade body will continue to contest the decision and plans to take it up in the House of Lords, most likely in November.