Government extends LASPO insolvency exemption

The government announced last week that the exemption from LASPO enjoyed by insolvency litigation – which was due to end next month – has been extended indefinitely.

In a written statement to Parliament, justice minister Lord Faulks said the two-year shield from the impact of the LASPO reforms “was to give insolvency practitioners and other interested parties time to prepare for and adapt to the changes. However, the government now agrees that more time is needed”.

He continued: “The government will therefore delay commencing sections 44 and 46 of the LASPO Act 2012 for insolvency proceedings for the time being… We will consider the appropriate way forward for insolvency proceedings and will set out further details later in the year.”

There has been a concerted campaign, led by insolvency trade body R3, to fight the end of the exemption.

A coalition of business groups wrote to David Cameron last October, warning him that ending the exemption could cost creditors over £160m per year – “with rogue directors the big beneficiaries” because only the largest creditors would be able to afford to pursue litigation.

The letter – also sent to Chancellor George Osborne, business secretary Vince Cable and justice secretary Chris Grayling – was signed by R3, the Institute of Credit Management, the British Property Federation, the Institute of Chartered Accountants in England and Wales, the Association of Chartered Certified Accountants and the Institute of Chartered Accountants Scotland.

Having initially shown no intention of changing its position on the exemption, the first sign of movement came in January after Conservative peer Lord Flight, citing R3’s lobbying, laid an amendment to the Small Business, Enterprise and Employment Bill that would make the exemption permanent.

Business minister Baroness Neville-Rolfe said she noted the concerns that litigation brought on behalf of insolvent estates has some differences in principle to other types of litigation, and about the potential impacts on litigation practice on behalf of insolvent estates.

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Published date
11 Mar 2015

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