By Tom Mcdonald
Today, certain provisions of the Insolvency Law Reform Act 2016 will take effect. Amongst these is s100-5 of the new Insolvency Practice Schedule (Corporations), which will be included as a schedule to the Corporations Act 2001. The same provision (with identical numbering) is contained in the Insolvency Practice Schedule (Bankruptcy), which is a schedule to the Bankruptcy Act 1966.
Section 100-5 allows officeholders to assign causes of action which are personal to them (e.g., voidable transaction and claims for insolvent trading), including claims which have already been commenced. Previously, whilst officeholders could assign certain statutory causes of action of the company or bankrupt, they were not able to assign statutory causes of action that were personal to them.
Before assigning any right to sue, an officeholder must give written notice to creditors of the assignment. In the case of an action that has already been commenced, there is an additional requirement that the approval of the Court must be obtained. The section does not set out any specific factors that a Court must take into account when considering such an application. It may be that a Court will take guidance from decisions where officeholders have sought directions relating to the assignment of causes of action of the estate. If that is the case, the following factors may be relevant:
Once the assignment has been effected, section 100-5(4) provides that a reference in the Act to the liquidator/trustee will be taken to be a reference the assignee.
Most insolvency practitioners are very familiar with the benefits that a traditional litigation funding product can bring to the pursuit of recovery actions in a liquidation or bankruptcy. The new assignment provisions have the potential to take that a step further by providing a new way for insolvency practitioners to create value for creditors and drive more efficient outcomes in liquidations and bankruptcies. For example:
In addition to providing litigation funding, Vannin would be happy to discuss with insolvency practitioners the potential of purchasing existing and future claims.
For more information on Vannin Capital, please contact: Leanne Harker, Marketing at Vannin Capital, T: +44 (0)1624 615 111, E: firstname.lastname@example.org