In this quick guide, we take a look at the key considerations to take into account before commencing litigation in respect of a potential claim.
This insight outlines the key considerations an officeholder must evaluate before commencing insolvency litigation. Officeholders are under a statutory duty to investigate potential assets of an insolvent estate, including claims against directors and third parties, and must carry out proportionate investigations even where funds are limited. Central to any decision to litigate is an assessment of the merits of the claim, including whether it has a better than 50% prospect of success and whether sufficient evidence can be obtained, often relying heavily on documents and third-party cooperation.
Beyond merits, the insight emphasises the importance of assessing the realistic prospect of recovery. Litigation should only be pursued where there is a reasonable likelihood that any judgment or settlement can be enforced to cover costs and deliver a meaningful return to creditors. The views and interests of creditors are also critical, particularly where recoveries may benefit different classes of creditors in different ways, requiring careful consultation and clear documentation of decision-making.
The insight also highlights the significant costs, funding challenges and risks associated with insolvency litigation, including potential personal liability for officeholders in certain circumstances. Funding options such as insurance, third-party funding or assignment of claims may need to be considered at an early stage. Finally, it stresses the often-lengthy timescales involved, the impact on the overall insolvency process, and the need to remain alert to limitation periods. Taken together, the insight underscores that the decision to litigate requires a careful, balanced assessment of legal, commercial, and practical factors, often with professional advice.
Read the full insight to learn more.
