Creditors are to be helped to recover funds owed to them by fraudulent and negligent directors under a pilot legal expenses scheme.

The scheme, which has been launched by the official receiver, will be run on a conditional fee basis, by a team of private sector lawyers and accountants from the Forensic Insolvency Recovery Service.

The official receiver acts as liquidator in cases where assets have been stripped in a dissolved company.

Brian Raincock, managing director of legal expenses insurer Litigation Protection, said the scheme would provide a quick source of funding for legal action against disgraced former company directors.

He said the official receiver had until now found it difficult to pursue directors disqualified for fraud or negligence because of funding limitations. More than 1,500 company directors are disqualified each year.

Raincock hopes the scheme will achieve a premium income in the first year of around £250,000.

If successful, the scheme could be extended beyond London and the South East.

Nick Oliver, an insolvency partner in solicitors Moon Beever, and member of the FIRS team, said it expected to take on 90 cases by late autumn, involving claims of up to £8m.