Claims against rogue directors set to rise

The insurance will counter the common situation where IPs were unable to sue rogue directors because it was too expensive and the director had taken all the company’s assets.

Steve Hunt, partner at insolvency firm Griffins, said the insurance was likely to drive up the number of directors being pursued ‘exponentially’.

He said: ‘The old adage was that if you’re going to take the money take it all because they can’t sue you afterwards. Now they have a greater chance of being sued. We now take more adventurous cases as a result of the insurance.’

Tim Branston, partner and head of forensic recovery at Kingston Smith & Partners, said: ‘These products are very useful and a very welcome addition.’

‘What worries an insolvency practitioner is if you’re liable to pay the other side’s costs if you lose. Without insurance you can’t do it, it’s out of your own pocket. IPs have not been keen to work on contingency matters, compared to asset-based recoveries.’

Chris Hiley of Greystoke Legal Services, which provides Insolvency Assist insurance, explained: ‘We have come up with a legal expenses insurance which allows IPs to sue directors at no risk and it also has a funding facility to fund the litigation.’

‘Both sides cost insurance, so if they lose the action the policy pays out the pertinent legal costs and their own legal costs. If they win the action then they get the costs from the losing party.’

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