April 14th 2020

Realising Immediate Cash from Older Cases

Amid all the uncertainty surrounding the COVID-19 pandemic and when the economy will return to some degree of normality, there remains, regrettably, the certainty that many businesses will not survive and will need the services of an Insolvency Practitioner.
The Government is putting in place measures to try and assist businesses to stay afloat during this period of lockdown and social distancing but the businesses which were suffering financial distress prior to the lockdown will not emerge any stronger. Many businesses which were breaking even or just profitable will not be able to service additional debt once any interest-free periods have elapsed. 
Already the IPA and ICAEW have reacted to the likely upturn in insolvency work by relaxing certain conditions. IP firms will find it hard to balance the influx of new work with the existing files already on their shelves.
Having worked as an IP myself in previous busy periods (particularly memorable are 1992 and 2009) I know first-hand that, unless old cases are closed now, the influx of new work will take priority for months to come.
There are statutory and compliance burdens to keeping old cases open. In liquidations, there is a requirement to send out annual reports and to document case reviews on a six-monthly basis. For administrations, the burden is worse: six monthly reports and, possibly, applications to court to extend the administration period.
I know from personal experience many older cases are kept open because of potential claims against Directors and third parties. Usually they are kept open because the case is marginal, and no one wants to abandon possible routes of recovery for creditors. Alternatively, more evidence may be needed to further a claim but the time involved in finding the evidence is difficult to justify given other case demands.
This is where Manolete can assist. As well as funding and taking assignments of claims with the net realisation being shared with the estate, Manolete can take outright assignments of claims on payment of a one-off up front immediate larger cash sum. This has the advantage for the IP of receiving the full cash consideration immediately which can then be used to pay costs or make a distribution to creditors. The case can then be closed quickly and will not need to be kept open to await the outcome of the claim. Closing the case in this manner enables IPs to remove any on-going statutory burdens and attendant costs and to focus on the new assignments that will be coming in. It is worth noting that the minimum claim size for Manolete to consider is just £20k.
Now is potentially a good time to close older cases so, if you wish to see what Manolete can offer in respect of an outright purchase of your claims, please do not hesitate to contact myself or your local Associate Director. 
Below are some recent examples of one-off payments for older claims:
  1. Big 4 Firm – Manolete paid £115,000 for the outright assignment of a legacy claim, enabling the liquidator to close the file.
  2. Another Big 4 Firm – Manolete paid £100,000 for the outright assignment of a claim that could potentially have taken years to realise.
  3. London Boutique Insolvency Firm – Manolete bought a problematic property from a TiB to enable final closure and distribution to creditors.
  4. Top 8 Firm – IP had agreed to settlement but Directors failed to honour the agreement. Manolete paid an immediate cash sum to the Estate.
  5. Another Big 4 Firm – Manolete paid £50,000 as a one-off sum. Case ongoing.
  6. A number of bankruptcy cases where Manolete has offered to purchase property subject to tenancy/alleged trust or taken assignment of equitable interests, providing immediate cash realisation to the estate without the delay and expense of litigation.
Nick O’Reilly
Associate Director, Manolete Partners PLC