Key developments in insolvency funding in Hong Kong and Singapore


Quentin Pak and Emily Tillett provide a deep dive into the developments in insolvency funding in Hong Kong and Singapore. to better understand its current status in these two jurisdictions, the practical considerations of financing in the insolvency context and what lies ahead for legal finance in Asia.


Legal finance has been used in Asia for over a decade in the context of insolvency, but the awareness of its use among the legal community and the appreciation of its value for insolvency practitioners have grown considerably following the introduction of the third-party arbitration funding framework in Singapore and Hong Kong. Courts in both jurisdictions have in recent years clarified and expanded the scope of legal financing arrangements for insolvency practitioners. Given the courts’ increased willingness to facilitate external finance, it is essential for practitioners to understand its current status in these two jurisdictions, the practical considerations of financing in the insolvency context and what lies ahead for legal finance in Asia.

Arbitration proceedings have brought renewed momentum to the use of funding in insolvency

Both Singapore and Hong Kong recently passed legislation establishing a framework for legal finance and its various products to be used in association with international arbitration matters. The framework in Singapore was given effect through amendments in 2017 to the Civil Law Act; the Hong Kong funding arrangement introduced by the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 was implemented in February 2019. The introduction of these arbitration frameworks has since led to a renewed interest in the development of the legal finance industry, not only in insolvency in Hong Kong and Singapore, but also more broadly across other Asian jurisdictions.

Further, growing focus in recent years on corporate governance in public companies has acted as a catalyst for the increasing willingness of liquidators and creditors to pursue claims relating to misconduct of former company directors and audit oversights.

The market momentum and growing awareness of legal finance more broadly are helping to facilitate the pursuit of claims relating to insolvency situations, thereby enhancing the prospects of recovery for creditors. As developments continue to unfold through case law and legislative reform, it’s essential for insolvency practitioners to stay up to date on the changing status of external finance in these jurisdictions and understand the practical considerations of insolvency proceedings and legal finance.

Developments in insolvency funding in Hong Kong vs. Singapore

The development of legal finance in Hong Kong and Singapore (outside the context of international arbitration) is progressing at different speeds, with Singapore more willing to make funding available whereas Hong Kong seems to be treading more cautiously


The Courts in Singapore have played an important role in pushing forward the development of legal finance in Singapore, and there have been significant changes in recent years to the law governing legal finance agreements in Singapore. The first came from the landmark 2015 decision Re Vanguard Energy, in which the High Court held, for the first time, that the sale of the fruits of a cause of action belonging to a company was within a liquidator’s power of sale and was therefore permissible. In Re Vanguard, Chua Lee Ming JC (as he then was) gave considerable support to the use of funding, expressing the view that it was “undeniable that litigation funding has an especially useful role to play in insolvency situations,” signaling growing support and a more positive attitude towards external finance from the Courts.

The second significant change came in 2017 when the Civil Law Act was amended to abolish the torts of maintenance and champerty, and the use of “third party funding” was recognized by legislation for the first time. It is noteworthy that the amendments to the 2017 Act were forwardlooking as funding is made possible for “prescribed dispute resolution proceedings" which, in addition to international arbitration, will in time be expanded to cover other dispute resolution mechanism.

The third and most recent development— the Insolvency, Restructuring and Dissolution Act (IRDA)—came into effect on 30 July 2020 as an omnibus legislation that collated and consolidated Singapore’s insolvency regime into a single piece of legislation. The Act expanded and clarified the circumstances in which an insolvency practitioner may use legal finance, consolidating the incremental developments brought by the Courts in this area.

Hong Kong

While maintenance and champerty remain torts and crimes under Hong Kong law, case law has incrementally expanded the permissibility and use of finance in the context of insolvency proceedings—an important exception to the operation of the two doctrines. However, the absence of broader reforms to the legislative framework has slowed this evolution, as there has not been the opportunity to formalize the use of legal finance in the context of insolvency proceedings. Development via case law is naturally a slower process.

Until recently, it has been the practice for liquidators to apply for court sanction and for funders to require such approval as part of the funding agreement. This position recently changed as a result of Re Patrick Cowley, which held that liquidators need not obtain court approval before entering into a third-party funding agreement.

Despite the absence of a comprehensive statutory regime for insolvency law, there is active development in this area. The Hong Kong Courts appear to be proactive in progressing the development of the insolvency law regime and a legislative overhaul has been a topic of much discussion over recent years. We expect the Hong Kong courts will continue to forge ahead in developing the common law in this area, including continuing to expand the permissibility of legal finance, and, in time, there will be a modernization of Hong Kong’s insolvency and restructuring framework.

Practical considerations for insolvency practitioners

Given the significant risks and costs associated with insolvency proceedings and challenges often encountered in obtaining a meaningful recovery for the estate, creditor activism is unsurprisingly low. Liquidators are service providers that are generally compensated using a fee-based structure, yet the discharge of their duties often come with personal liability. These features of liquidator appointments often make the pursuit of big ticket litigation a less than compelling proposition. The risk is accentuated where the liquidator faces the possibility of adverse cost orders. With liquidators (and creditors) being understandably hesitant to throw good money after bad, it is often not possible or feasible to undertake inquiries and initial investigations into possible claims due to lack of funding. This means that good claims may ultimately not be pursued and money for creditors is left on the table.

Legal finance helps liquidators overcome limited creditor activism

Legal finance can help mitigate some of the issues faced by liquidators of estates with no money by providing capital, after-the-event (ATE) insurance and asset recovery services.

  • Portfolio finance—the funding of multiple unrelated claims within the same estate—helps liquidators leverage strong claims with strong recovery prospects as anchor cases, allowing seed capital to be provided for other cases that may otherwise not be sufficiently developed to be considered for funding.

  • 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 costs risk, Burford can provide insurance for matters we are funding through our wholly owned insurer, Burford Worldwide Insurance Limited (BWIL).

  • Burford’s in-house asset recovery team can help liquidators trace assets and enforce judgments in many jurisdictions around the world. Burford can provide this service on a contingent basis, reducing or eliminating the risk of non-enforcement.

Developments in asset recovery in Mainland China

Mainland China has traditionally been a challenging jurisdiction in which to enforce cross-border claims, but a recent crossborder arrangement (“The Cooperation Arrangement”) between mainland China and Hong Kong means that courts in Shanghai, Shenzhen and Xiamen could begin to mutually recognize restructuring or liquidation orders from Hong Kong courts that encompass assets in these cities. This pilot program has fairly narrow application—applicants need to demonstrate that the company’s “center of main interests” is in Hong Kong—but may well assist both off-shore and onshore creditors to recover losses by making claims on foreign assets. If this pilot program is successful, it is anticipated that other Mainland courts will be added to the arrangement. While a new and unproven development, this is a positive step for investors seeking recovery in mainland China.


With insolvencies in Asia expected to increase as a result of the economic impact of the pandemic, the demand for legal finance in Hong Kong and Singapore will likely accelerate. We have already seen a sharp increase in insolvency activity in the region as the Chinese economy has slowed. (particularly in Hong Kong where businesses are closely connected with the mainland economy). Given the positive recent developments in the law around third-party funding and the growing availability of capital, legal finance is increasingly becoming an essential part of an insolvency practitioner’s toolkit for maximizing recoveries for the insolvent estate and securing redress for creditors and wronged parties.


Quentin Pak is a Director with responsibility for leading Burford’s office in Singapore and for expanding Burford’s resources to support clients in Asia. He works with corporations, law firms and insolvency practitioners, both in relation to Asia-based legal proceedings and for companies involved in disputes in other jurisdictions.

Emily Tillett is a Vice President at Burford with responsibility for leading its investment activity and operations in Hong Kong. A Hong Kong, Australian and New Zealand qualified lawyer, she has multijurisdictional expertise in complex commercial disputes.