Litigation funding is a growth area and, recognising that finance for insolvency litigation is a specialist area, Chambers and Partners introduced a new ranking for insolvency litigation funding in 2021 to assist IPs and insolvency lawyers when researching funders.

Manolete was the only funder to be ranked in Band 1 for insolvency litigation funding in 2021, and is delighted to again be the only funder ranked Band 1 for insolvency litigation in 2022, confirming our position as the leading UK provider of finance for insolvency litigation. Established in 2009 and listed on the London Stock Exchange (AIM) in 2018, Manolete has invested in 755 cases to date. Realisations total £84m of which £39m has been returned to insolvent estates after payment of all legal costs and expenses.

The UK insolvency industry is now emerging from the unprecedented economic, financial and social effects of the Covid pandemic. Lockdowns, Government business support measures and legislation restricting enforcement action against companies and winding up petitions whilst suspending certain provisions of the Insolvency Act 1986 have all impacted on the work of insolvency practitioners and insolvency lawyers.

The restrictions on the presentation of winding up petitions which applied under the Corporate Insolvency and Governance Act 2020 from 26 June 2020 to 30 September 2021 have suppressed the number of companies being wound up by the court. On the lifting of restrictions, there is a huge backlog of winding up petitions.

Government support measures such as Bounce Back Loans, the Furlough Scheme, Business Grants and temporary tax cuts enabled some companies to continue which would otherwise have entered into creditors' voluntary liquidation or other insolvency regime. Following the withdrawal of the support measures there is a considerable increase in the volume of companies entering into insolvency.

According to the Insolvency Service’s latest statistics the number of company insolvencies in England and Wales in April 2022 was 1,991. This figure is more than double the 925 registered in April 2021 and is 39% higher than the 1,429 registered in April 2019. Of the 1,991 figure, there were 1,777 creditor voluntary liquidations which is 118% higher than April 2021 and 74% higher than April 2019. There were 91 compulsory liquidations, 203% higher than April 2021. This year-on-year increase can be expected to continue.

Under the Corporate Insolvency and Governance Act 2020 the threat of personal liability for wrongful trading under section 214 Insolvency Act 1986 was temporarily removed from directors from 1 March to 30 September 2020 and from 26 November 2020 to 30 June 2021. This may well have lulled some directors into a false sense of security in relation to their conduct. In practice, wrongful trading claims are rarely brought. What is more common are claims in damages for breach of duty or misfeasance, and directors’ fiduciary and other duties under the Companies Act 2006 and at common law have continued to apply throughout

Support measures, the Bounce Back Loans in particular, were readily accessible by directors with minimal diligence being carried out. Evidence is emerging of wide scale abuse by directors of the support schemes and misapplication of public monies. It is estimated by the Parliamentary Public Accounts Committee that of the £47 billion paid out in Bounce Back Loans, £17 billion is expected to be unpaid. Many companies which received Bounce Back Loans will proceed to insolvency and the only prospect of recovery will be through claims against delinquent directors.

All of the above creates a 'perfect storm' of increased numbers of insolvencies in the months and years to come and within those insolvencies claims against directors and connected parties. Most insolvent estates do not have a war chest from which to pay for litigation, creating the need for finance from third party insolvency litigation funders.

I am very grateful to the IPs and insolvency lawyers who supported our Chambers submission and together with my colleagues at Manolete look forward to continuing our work of supporting the insolvency profession to achieve maximum realisations.

Steven Cooklin, CEO
Tel: 0203 859 3490
steven@manolete-partners.com

Mena Halton, Managing Director
Tel: 0203 859 3495
mena@manolete-partners.com