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Offer by potential funder to fund costs of relevant action

Insolvency, Restructuring and Dissolution (Assignment of Proceeds of an Action) Regulations 2020

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—(1) A relevant insolvency practitioner of a company may in accordance with this regulation solicit an offer from one or more creditors or members of the company, or one or more Third‑Party Funders, to fund all or part of the costs of a relevant action, in return for the assignment of a share or other interest in the proceeds or potential proceeds of the relevant action to which the company may become entitled.(2) When soliciting an offer from a creditor or member of the company, or a Third‑Party Funder, the relevant insolvency practitioner must provide a copy of the written notice mentioned in paragraph (3) to the person.(3) The written notice must contain all material information necessary for the consideration by the creditor or member of the company, or the Third‑Party Funder, of the invitation, including but not limited to —(a)the nature of the relevant action or contemplated relevant action;(b)the parties or potential parties involved;(c)the estimated potential proceeds of the relevant action or contemplated relevant action;(d)the estimated amount of funding sought; and(e)the date by which an offer of funding is to be received by the relevant insolvency practitioner.(4) An offer by a member or creditor of the company, or a Third‑Party Funder (called in this regulation the potential funder) to fund all or part of the costs of the relevant action or contemplated relevant action must be —(a)made in writing;(b)received by the relevant insolvency practitioner before the date mentioned in paragraph (3)(e) (or such later date as may be extended by the relevant insolvency practitioner); (c)accompanied by a statement that there is no actual or potential conflict of interest between the potential funder and —(i)the parties or potential parties in the relevant action or contemplated relevant action;(ii)the lawyer acting for the company in bringing the relevant action or contemplated relevant action; or(iii)the lawyer acting for the parties or potential parties in the relevant action or contemplated relevant action; and(d)accompanied by a statement —(i)that there is no actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner; or(ii)describing the actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner.(5) Where, at any time after a statement mentioned in paragraph (4)(c) or (d) has been given to the relevant insolvency practitioner, a potential funder or funder becomes aware of an actual or potential conflict of interest mentioned in that provision, that would render the statement incomplete or inaccurate, the potential funder or funder must immediately notify the relevant insolvency practitioner of the actual or potential conflict of interest concerned.(6) Before entering into a Funding Agreement with a potential funder pursuant to an offer made under this regulation, the relevant insolvency practitioner must obtain approval from the following: (a)in the case of a winding up by the Court — from the committee of inspection or failing such approval, from the Court;(b)in the case of a creditors’ voluntary winding up — from the committee of inspection or failing such approval, from the Court;(c)in the case of a members’ voluntary winding up — from the company by special resolution; (d)in the case of a judicial management —(i)from the committee of creditors; (ii)failing such approval mentioned in sub‑paragraph (i), from the meeting of creditors; or (iii)failing such approval mentioned in sub‑paragraph (i) or (ii), from the Court.(7) Subject to paragraph (8), the relevant insolvency practitioner must not seek to obtain an approval mentioned in paragraph (6) if the relevant insolvency practitioner is aware of an actual or potential conflict of interest mentioned in paragraph (4)(c) or (d).(8) Where there is an actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner, the relevant insolvency practitioner —(a)must make a full and frank disclosure of the interest —(i)in the case of a members’ voluntary winding up — to the members of the company; or(ii)in the case of a judicial management or any other type of winding up — to the creditors of the company; and (b)may seek an approval mentioned in paragraph (6) if the relevant insolvency practitioner has obtained the informed consent to do so of —(i)in the case of a members’ voluntary winding up — the company by special resolution; or (ii)in the case of a judicial management or any other type of winding up — a three‑fourths majority in value of the creditors of the company. (9) When seeking an approval mentioned in paragraph (6) from the committee of inspection, committee of creditors, meeting of creditors, the company by special resolution or the Court, the relevant insolvency practitioner must provide the material information relating to the offer, including —(a)the efforts taken by the relevant insolvency practitioner to solicit offers from creditors or members of the company or Third‑Party Funders;(b)the identity of the potential funder; and(c)a summary of the material terms of the offer, including, where applicable —(i)the amount of funding to be provided; (ii)the purpose for which the funding is provided (e.g. lawyer’s fees);(iii)the order of priority or structure of the assignment of proceeds of the relevant action to the potential funder; and(iv)the share of the potential proceeds to be assigned to the potential funder.(10) A creditor or member of the company who —(a)has made an offer to fund all or part of the costs of the relevant action or contemplated relevant action for which approval is being sought; or (b)is a defendant or potential defendant in the relevant action or contemplated relevant action, must not attend or vote in a meeting of creditors, the committee of inspection, the committee of creditors, or the company to consider a special resolution, to approve the entering into a Funding Agreement to fund all or part of the costs of that relevant action.

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