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Litigation Funding: Companys
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It is important to note that Litigation Funding can be considered as a form of insurance against a potential loss in the legal claim. In other words, the plaintiff receives a financial guarantee that they will receive a financial recovery regardless of the outcome of the legal claim. If there is no financial recovery from the legal claim then the plaintiff will still obtain a financial recovery from the claim by keeping the cash advance received from the litigation funding company without obligation to repay any amount. If... the legal claim is successful, the plaintiff is only obligated to repay the cash advance they received plus fees. Regardless of the outcome, a plaintiff is guaranteed a financial recovery and that is assurance or insurance no matter how you look at it.
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Litigation funding is a growth industry both in the UK and beyond these shores. Company directors (especially those who benefit from D&O insurance) will be among those in the firing line as tempting targets for such claims.
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The liquidators of a failed wine venture entered into a litigation funding agreement and brought proceedings against the company’s directors for insolvent trading. The liquidators knew that the maximum potential recovery was only a fraction of the value of creditor claims. Even if the litigation was successful, creditors would receive minimal or no return.
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[One] area that is less controversial is using a funding company to loan money to the attorney to cover litigation expenses. This is a more conventional situation and in accordance with IRS regulations treating litigation expenses as 'loans' to the client as opposed to business expenses. Usually these arrangements are with more traditional lending sources, although legal funding companies do these loans as well.
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