LegalPay, which is the country’s largest litigation funding platform, has launched ‘Interim Financing Bonds’ that will allow retail investors to participate in a segment that is largely seen as an arena only for the high-net-worth individuals (HNIs).
These bonds are fixed-income instruments to finance the expenses of companies undergoing Corporate Insolvency Resolution Process (CIRP). Retail investors can invest a minimum of ₹10,000 in these bonds that have a credit rating of BBB- and a coupon rate of 14 per cent.
Litigation funding is fast gaining popularity in India as an increasing number of law firms and businesses look at such financing to fund their legal matters.
Simply put, litigation financing is third-party funding for litigation matters. While litigation financing is quite new in India, it is quite popular in many of the developed economies where there are dedicated ventures that specialise in such kind of funding.
Companies undergoing insolvency require funds to remain afloat and manage their day-to-day expenses. Even as the company is run by a resolution professional, he or she requires funds to maintain the maximum value of assets and pay salaries and wages to workmen and employees, professionals, etc.
Such finance is raised by resolution professionals in the form of interim finance.
More importantly, interim finance is a part of the corporate insolvency resolution costs and has been given super-priority at the time of repayment. Therefore, investments provided in the form of interim finance are guaranteed first-priority status and backed by IBC Code.
“Opening such investments to retail investors will act as a step towards democratising wealth creation and providing diversification benefits to retail investors. Retail investors usually have access only to traditional securities, primarily listed equities or fixed deposits,” said Kundan Shahi, CEO, LegalPay.
LegalPay was started in 2019 with the aim of solving the problem of legal expenses. The Delhi-based start-up holds over Rs 2,500 crore in claims under management in various litigations in different jurisdictions across India.
It has provided interim finance across different sectors such as manufacturing, hospitals, real estate, post-production houses and malls.
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