A LAW firm yesterday launched a fund to help smaller businesses with the cost of bringing legal action against banks and other financial institutions.
Edinburgh-based MBM Commercial said that the fund, called “Restitution”, is being backed by two unnamed private investors and will be run as a separate venture from its main activities.
Applications will initially be submitted through MBM, which also anticipates receiving referrals from other firms that might face a conflict of interest if asked to sue a bank for which they also carry out work.
Cat MacLean, head of dispute resolution at MBM Commercial, said the incidence of businesses being let down by commercial lenders has become a “huge problem” across industry.
“Even some companies that traded profitably had loans and mortgages called in because the banks took a policy decision to retreat from property-based lending,” she said.
MacLean added that her firm, which specialises in advising growing companies and their investors, had also been involved in a number of cases of potential mis-selling of complicated financial hedging instruments such as interest rate swaps.
She believes the launch of Restitution will bring more cases like this to the fore, as many small firms have been deterred from pursuing a case against a large financial institution.
The fund will have no formal limit on the size or type of company that may apply.
Although most are expected to come from Scotland, Restitution may also fund litigation that takes place in English civil courts.