If employed strategically by creditors, litigation funding can enable the creditor to seek a priority payment, which may result in a significant recovery.
With the anticipated flood of new insolvencies as a result of the COVID-19 pandemic, being aware of the key factors and best practice has never been more important for creditors and insolvency practitioners alike, especially those creditors seeking to enjoy a priority.
Michael McDonnell, Principal of Results Legal recently published an article in the Australian Restructuring Insolvency and Turnaround Association (ARITA) journal that highlighted the tips and traps for practitioners where litigation funding is used.
These principles are also relevant for credit providers and business advisors. Using these strategies can reset the balance of power in favour of minority creditors even in the face of what seems to be insurmountable disparities in voting power, having regard to the quantum of the debts.
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Creditors and insolvency practitioners should obtain specialist advice regarding potential funding matters and the underlying claims and causes that are the subject of potential funding.
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