The New Year is often seen as a way to have a fresh start. However, Simon Konsta, partner at Clyde & Co. London, believes that 2021 will be difficult for directors, officers, and their advisors due to a projected increase in insolvency claims against them.

An insolvency claim is when an individual or a company no longer has the means to pay back their financial obligations to lenders as their debts become due.

Konsta stated that, “The view from specialists across our network is that while legislative measures… have offered some protection to directors of companies facing financial difficulties, insolvency claims will be a strong driver of D&O (Directors & Officers) risk in 2021.” He also felt that the rise of many insolvency claims against solicitors, accountants, auditors, and property professionals will be related to COVID-19.

Konsta also compared these current increase of insolvency claims to 2008 global financial crisis. The expert believes that stricter regulator regimes have better prepared companies today and those who advise them than in 2008. Even though they may be better braced for crises, there are now raised expectations placed upon them.

The Clyde & Co. London partner also feels that consumers will not hesitate to find fault in these companies if these expectations are not realized. He said, “Fuelling stakeholder expectations that ‘someone’ must be made to pay for corporate failure are the litigation funders who are increasingly ‘baked in’ to the claims lawyers’ business model and therefore much more likely to be a driver of liquidator and third-party claims against professionals in 2021,”

Konsta said that litigation funding cannot be called a “game changer” at this point, especially when many cases are anticipated. However, the Clyde & Co. partner expects that a higher volume of funded insolvency claims will have “important practical and strategic implications for businesses, their advisers and ultimately their insurers.”

Konsta does not anticipate litigation funding to make much of an effect when so many of these cases are to be expected. He does foresee an increased amount of funded insolvency claims will have “important practical and strategic implications for businesses, their advisers and ultimately their insurers.”

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