Higher court fees to result in more insolvencies?

27 February 2015

A report from the Law Society has outlined the potential consequences of the government’s move to increase court fees later this year. It’s thought higher fees (could go up by 600%) will result in fewer companies bringing cases to court and more entering insolvency.  

Court fees could be too expensive for small businesses if there was a dispute over unpaid invoices, making it difficult to recover debt and leaving them with cashflow problems.  

However, this could also mean that creditors are less inclined to chase after debt because of high court fees. More companies might avoid insolvency but then they could be considered as ‘zombie companies’, businesses that don’t make profit but just survive by paying off debt. 

In January, the government announced the new plans would include a 5% fee increase on the sum claimed if it’s worth more than £10,000.

President of the Law Society, Andrew Caplen, commented “The government’s 600 per cent hike in court fees could cripple the small and medium-sized businesses that play a vital role in our economic society”. 

Organisations including the London Solicitors Litigation Association and the City of London Law Society are issuing warnings over the changes which are due to take effect from April.