Leeds MP tables motion for review of insolvency litigation plans
Greg Mulholland, Liberal Democrat MP for Leeds North West, has tabled an early day motion calling for a review of changes that would make it more difficult for insolvency practitioners to secure returns for creditors from fraudulent directors.
Early day motions, or EDMs, are formal motions submitted for debate in the House of Commons. Not all are actually debated but they do allow MPs to draw attention to a given cause or event. This particular motion, along with Mr Mullholland’s previous raising of the issue in Parliament, has been welcomed by the insolvency practitioners UK trade body R3.
As the association of business recovery professionals in the UK, R3 has itself been campaigning against certain aspects of ‘the Jackson reforms’, which came into effect in 2013. The reforms brought in changes to ‘no win, no fee’ rules, effectively meaning that claimants now have to pay a larger proportion of legal costs.
The Government did grant an exemption to the rules for cases involving insolvency litigation but it’s unclear when this exemption will end. Mr Mulholland has called for a formal review of the Jackson reforms before any announcement is made on the current exemption.
It’s feared that, should the exemption end with the rules still in place, it could affect insolvency practitioners’ willingness to take on some cases. Litigation is currently undertaken by insolvency practitioners with the costs taken from the assets of the insolvent company if they are sufficient or, alternatively, via a no-win no-fee arrangement. If the Jackson reforms were applied to insolvency cases, no-win no-fee costs would not be recoverable.
According to Mr Mulholland, around £160 million is thought to be owed to businesses and taxpayers every year due to fraudulent actions by company directors. If insolvency practitioners do not take cases due to no-win no-fee changes, this money could stay in the possession of those directors.
Adrian Berry, chair of R3 in Yorkshire, welcomed the MP’s support and said that R3 was seeking a permanent exemption for insolvency cases.
By Phil Smith