As the Litigation Finance industry has grown, some parts of the world have met the practice with suspicion. Some countries have suggested or enacted legislation designed to encumber and restrict the process of third-party funding in litigation. In the wake of COVID-19, however, the need for the practice has been affirmed.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
As the Litigation Finance industry has grown, some parts of the world have met the practice with suspicion. Some countries have suggested or enacted legislation designed to encumber and restrict the process of third-party funding in litigation. In the wake of COVID-19, however, the need for the practice has been affirmed.
Omni Bridgeway explains that Singapore is one country whose newest legislation is welcoming to the practice of litigation funding, and cognizant of the good it can do. The Insolvency, Restructuring, and Dissolution Act was passed in 2018, and went into effect in July of this year.
Provisions of the IRDA include consolidation of personal and corporate insolvency, as well as debt restructuring laws. It also expands the powers of judicial managers and liquidators as they relate to dispute funding. Judicial managers are a softer option than liquidators, in that the appointment of an external judicial manager will protect the company from legal proceedings during the process—at least temporarily. This gives the company a better chance to get its finances in order for a potential recovery.
When action is taken against an insolvent business, a third-party funder may be used in several specific situations, such as fraudulent trading, unfair or undervalued trades, and damages against individual delinquent officers.
That said, the new IRDA provisions are not intended to impact existing funding arrangements or laws regarding them. Class actions and other types of third-party funding against companies are still permissible.
Singapore also enacted a Temporary Measures Act, which came into law in April of this year. It offers temporary financial relief for individuals and businesses—and will remain the law until October 2020. Some speculate that extensions may be granted, depending on the COVID situation at that time. The act increases the thresholds for bankruptcies, and extends the deadline for businesses and individuals to respond to demands from creditors.
