As INSOL Hong Kong approaches, a refresher on insolvency finance in Asia
Summary
I’m looking forward to speaking during INSOL Hong Kong on March 17 at the Small Practice Group Meeting, where I will be chairing a panel on litigation funding in the insolvency context. In the lead-up to the event, I’d like to share insights into how insolvency financing is evolving in Asia.
I’m looking forward to speaking during INSOL Hong Kong on March 17 at the Small Practice Group Meeting, where I will be chairing a panel on litigation funding in the insolvency context. In the lead-up to the event, I’d like to share insights into how insolvency financing is evolving in Asia — particularly in key financial hubs like Hong Kong and Singapore — where litigation funding is playing an increasingly vital role in unlocking value for creditors and insolvency practitioners. At Burford Capital, we are closely tracking these developments and prioritising solutions that help legal and financial professionals navigate the region’s unique regulatory and market dynamics.
The evolution of legal finance for insolvency in Asia
While not all forms of commercial legal finance are permitted in Asia, Burford has been on the ground in the region since 2015, playing a pivotal role in shaping the litigation funding industry in Hong Kong and Singapore. Long before legal finance was fully present in these jurisdictions, Burford was at the forefront, helping to establish and advance its use in complex commercial disputes.
In the insolvency context, Hong Kong courts acknowledged the role that legal finance plays in supporting claims brought by liquidators on behalf of insolvent estates as early as 2009. While litigation funding is generally restricted in Hong Kong, insolvency-related claims are a key exception, allowing legal finance providers to play a crucial role in maximizing recoveries for creditors.
In Singapore, insolvency finance was permitted even prior to the 2017 Civil Law Act, which paved the way for arbitration financing within the jurisdiction. As part of efforts to become established as a leading hub of debt restructuring and cross-border insolvency, Singapore introduced significant reforms to its insolvency framework that have been in effect since July 2020.
How does legal finance in the insolvency context work?
For financially distressed or insolvent parties, legal claims can be among their most valuable — but often overlooked — assets. Liquidators operate as service providers, typically compensated through a fee-based structure, yet their role comes with significant personal liability. This dynamic can make pursuing high-value litigation an unappealing prospect, particularly with the risk of adverse cost orders looming large. Given these challenges, both liquidators and creditors are often reluctant to invest in litigation without certainty of recovery, making it difficult to justify the cost of initial investigations and claim assessments. As a result, strong claims may go unpursued, leaving potential recoveries for creditors unrealised.
Legal finance offers a solution by providing non-recourse funding, enabling parties, their creditors or insolvent estates to unlock the full value of their claims without bearing the upfront costs and risks of litigation.
The benefits of legal finance in the insolvency context include:
-
Maximising recoveries for creditors: Funding ensures that insolvency practitioners can pursue viable claims, increasing potential returns for creditors.
-
Providing liquidity for ongoing operations: Funding provides immediate cashflow for the insolvent estate that can cover operational costs or other restructuring efforts while litigation is ongoing.
-
Removing financial risk: Legal finance is non-recourse, meaning funders only recover their investment if the claim is successful, removing the risk for insolvent estates in pursuing litigation.
-
Asset recovery services: Burford’s in-house asset recovery team can help liquidators trace assets and enforce judgments in many jurisdictions around the world.
-
ATE insurance: ATE insurance mitigates adverse costs risk for liquidators, enabling them to pursue strong claims without having to worry about attracting personal liability for these costs. To protect clients from adverse cost risk, Burford can provide insurance for matters we are funding through our wholly owned insurer, Burford Worldwide Insurance Limited (BWIL).
Why Burford?
Burford is by far the largest full-service legal finance provider on the ground in Asia. Our local team has experience with legal systems in the region, including Hong Kong and Singapore, and our global team speaks more than 15 languages including Mandarin and Cantonese.
I’m looking forward to speaking more during INSOL about how Burford can work with or on behalf of insolvent estates to meet their legal financing needs. Please don’t hesitate to contact me or email [email protected] for information or with any other questions.
