ABSTRACT
A major problem faced by a liquidator or trustee in bankruptcy in trying to swell the assets or, indeed, fight off claims which will deplete the assets is that of funding any necessary litigation. Costs of all proceedings will now1 be a first charge on the assets of the insolvent,2 thus reducing the amount available for distribution, but until recently the insolvency practitioner would become personally liable in some cases unless she or he could obtain an indemnity from elsewhere. It may be that, in any event, the assets provide the insolvency practitioner with insufficient resources to embark on litigation unless an additional sources of finance can be found. It may be possible to persuade some of the creditors to finance the litigation or to indemnify the insolvency practitioner against the costs on the basis that they will be indemnified out of the net recoveries of the action before any distribution of the recoveries is made. Where creditors might be prepared to provide funds, they may be deterred by the prospect of any proceeds of the litigation being shared with creditors who are not prepared to take the same risk.3 The issue of whether any recovered assets will be subject to any floating charge4 may also influence their views.
