Administration Case Study – Solicitors’ Business
2 partner solicitors’ business employing 80 people undertaking conveyancing and personal injury claims work.
The business operated as a limited partnership and expanded rapidly in the 2 years leading to the business becoming insolvent. The expansion had taken place following the partners’ decision to aggressively target the expanding market for personal injury claims. The business invested a substantial amount of cash borrowed from a new lender to the legal profession on campaigns to acquire new clients. Due to the rapid expansion of the business the partners struggled to manage the new work which was generated with the result that cases took longer to progress than estimated. It transpired that the income generated from the new cases was substantially less than estimated as many of the cases turned out to be of poor quality or in some instances fraudulent claims.
The lender and the partners recognised the difficulties facing the business and attempted to work together to find a solution which would be acceptable to all parties. Bennett Jones were retained by the lender with a view to assisting in this process. The partners were ultimately unable to agree with each other and the lender on the way forward for the business and the lender proceeded to arrange for us to be appointed as Administrators by Court Order.
Our immediate priority was to secure the best value possible for creditors. The only significant assets of the business were the debts owed by clients and the value of work in progress representing the work undertaken on numerous cases which would only be invoiced when the cases eventually concluded.
We informed the Solicitors Regulation Authority of our involvement and worked with the partners of the business to ensure there was an orderly transfer of clients’ files to firms who we were confident would be capable of undertaking the work required for the clients and ultimately accounting to the Administrators with the realisations of the work in progress. Once the arrangements had been agreed for transferring the clients files we were able to proceed with seeking the Court’s consent to appointing us administrators and immediately following our appointment concluding the agreements for the transfers of client files.
By involving the firm’s lenders, partners and the Solicitors Regulation Authority in the negotiations and process leading to the Administration we were able to deliver the best outcome in the circumstances for the firm’s creditors as well as achieving an orderly closure of the business and transfer of clients’ files.