South: Insolvency professionals R3 call on government to scrap legal reforms

A group of Hampshire and Dorset insolvency experts have warned that government legal reforms could cost creditors over £160 million a year from next April - with rogue directors the big beneficiaries.

The southern committee of R3, which brings together insolvency experts from companies such as Quantuma, Coffin Mew and Baker Tilly, is backing a call for the Government to scrap the planned change.

Nationally R3, the insolvency trade body, has joined forces with a number of high-level business groups, including the Institute of Credit Management, the British Property Federation and the UK’s key accountancy bodies, to send a letter to the prime minister and justice secretary asking for the Government to reconsider its reform.

From April 2015, insolvency litigation will no longer be exempt from the crackdown on ‘no-win, no-fee’ legal funding introduced by the 2012 Legal Aid, Sentencing and Punishment of Offenders Act (the ‘Jackson’ reforms). This type of funding is often the only way creditors can afford to pay for court cases to retrieve money from rogue directors that have wrongly taken money out of a failed business.

Andrew Watling, chairman of the Southern Committee of R3 and a director at Quantuma in Southampton, said: “These changes are anti-business, will increase tax avoidance and evasion, and will benefit directors of insolvent companies who have committed fraud or behaved recklessly.

“Many insolvencies affect creditors who do not have the resources to provide funding to pursue cases where they have lost money. From April 2015 many of these cases will not be affordable to pursue, leaving taxpayers and small businesses out of pocket and rogue directors walking away with more than £160m a year.”