Government makes U-turn on plan to end LASPO insolvency exemption

Government makes U-turn on plan to end LASPO insolvency exemption

Today, the government has confirmed that the exemption from prohibition of recovery of CFA success fees and ATE premiums under LASPO 2012 will continue indefinitely.

It was expected that in April of this year the insolvency exemption would be brought to an end. All previous signs were that the government was determined in this regard. However, after strong opposition from the industry, Justice Minister Shailesh Vara has announced today that the government will abandon these plans and propose a review later this year.

In this letter written to the House of Commons, which cites the ministerial statement by Justice Minister Lord Faulks, Mr Vara confirms that:

“The government will therefore delay commencing sections 44 and 46 of the LASPO Act 2012 for insolvency proceedings for the time being. Accordingly, no win no fee agreements in insolvency proceedings will continue for the time being to operate on a pre-LASPO Act basis with any conditional fee agreement success fees and after the event insurance premiums remaining recoverable from the losing party.

“We will consider the appropriate way forward for insolvency proceedings and will set out further details later in the year."

Steve Dillon, Partner and Head of Insolvency at Gosschalks, comments:

“This is welcome news for Gosschalks, our clients and the industry. It is also a victory for common sense and also the efforts of the insolvency industry over recent months to force a rethink by the Ministry of Justice. Along with many others, including members of R3, I have been in correspondence with Westminster (in my case, The Rt Hon David Davis MP) and it is gratifying that our valid concerns regarding the impact on the insolvency market have been listened to.

"At least in the short term, this decision should avoid the predicted rise of director fraud due to lack of funding options available to Insolvency Practitioners to take action against them.”

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Steve Dillon has specialised in insolvency for over a decade and is a well-known figure in the corporate recovery arena.

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