iStock_000011180797_SmallOne of the changes introduced by the Small Business Enterprise and Employment Act 2015 (“SBEE”) which came into force on 1 October 2015 was to allow administrators and liquidators the right to assign their rights of action in respect of fraudulent trading claims, wrongful trading claims, transactions at an undervalue, preferences and extortionate credit transactions. A summary of the changes introduced by SBEE on 1 October 2015 are detailed in our earlier blog: Powerful Changes to UK Insolvency Legislation – Are You Ready?

This particular change is good news for creditors as it will allow claims to be pursued against directors in cases where there are insufficient funds in the insolvent estate for the administrator/liquidator to pursue the claim. It remains to be seen whether a market will develop for parties to purchase such claims.

Directors, however, may not welcome the change. They will not have any power to prevent claims from being assigned to overzealous creditors. Directors should also double check the small print on their Directors and Officers Insurance Policy now. Whilst their policy is likely to cover their costs of defending a claim brought against them by an officeholder, it may not cover their costs of defending a claim brought against them by a third party. Such costs could be considerable, especially if the creditor bringing the claim has an axe to grind. This is an area the insurance market is bound to respond to.

IPs might also want to check that directors have appropriate insurance cover. An insured claim is likely to be a more valuable asset to assign than an uninsured claim. IPs will also need to consider the terms of any assignment carefully. How much assistance will they be expected to give the assignee and will it impact upon the length of time that they need to stay in office?