We are a firm of very worried solicitors. Our legal practice is a partnership. We are under growing pressure from all sides. How can you help us solve these problems, restructure and survive?
Help for lawyers – Plan A, informal deals and refinancing
Clearly, any risk of insolvency or cashflow problems is heightened by the lack of limited liability and the risk of the practice closing. It may impact you all personally. So we need to try and protect you and your partners as much as possible.
There are three options to deal with severe cashflow problems
Plan A Informal deal with creditors, coupled with possible refinancing;
Using the threat of the insolvency options can be like the proverbial Sword of Damocles , you can wind the partnership up, go personally bankrupt or enter a PVA /IVA (see below) but the creditors would undoubtedly see a compromise or even complete discount of their debts if that occurred.
Being prepared to argue with creditors that the informal route means at least some if not all of their debt is recovered and that this approach will allow you to practice in future. It is the ‘common sense’ solution.
KSA will always however make sure that the options of partnership voluntary arrangement (PVA) or IVA/ personal bankruptcy have been assessed, a statement of affairs prepared and valuations of properties obtained to counter the why wait for money what if we simply wind the partnership up and make the chaps bankrupt? questions. The motto is we are prepared for their aggressive questioning.
If you or your partners have a lot of property equity personally and the practice closes then be prepared as HMRC in particular go after that. Like most people though you probably have little liquidity, having not drawn much recently from the practice, equity is tied up and your spouses are entitled to half anyway. So pointing this out bluntly allows us to prepare a plan for the recovery of the creditors monies over a considerable period of time say 8-12 months.
Yes, even if HMRC has rejected YOUR suggested time to pay proposals.
We would always insist on the following work being part of our restructuring brief.
- Detailed DAILY CASHFLOW we can provide the tools and assess this for the partnership. But this MUST be introduced and to help survival you or your admin people must update every day.
- Statement of affairs for the partnership and probably for your own assets. Probably requires a desk top valuation of any partnership or personal property. KSA will do this confidentially as part of the brief
- Detailed financial forecasts for the partnership business. What if scenario planning, i.e. what if fee income falls, WIP is not all collected for example?
- Negotiations with the creditors (usually HMRC and the bank) in person and where required in writing led by KSAs experienced debt negotiators.
- Assessment of your personal property and assess possibility of new debt from property(s)
This process can be delivered in 1-4 weeks from engagement and is led by very pragmatic experts in this field. Before commencing we will set out the strategy plan in writing. This work is always costed in writing in our unique solutions report which is provided FREE after your first meeting with a KSA Director or Regional Manager.
Our fees usually come from cashflow savings that we can create for you as part of this process.
What now? If your business has cashflow problems you must act or the creditors will, sooner or later act aggressively against you.
A word of warning. If your partnership has relied upon multiple time to pay deals over recent years with HMRC and these deals have regularly not been adhered to, then this first option may not succeed, but we believe it is still worth trying.
What if Plan A does not work?
Plan B is to propose a partnership voluntary arrangement paying creditors 100p in £1 or less with linked individual voluntary arrangement
Plan C partnership liquidation and probable personal bankruptcy, where the practice closes and you go personally bankrupt
Of course, acquisition by another firm is a possibility too. Will this acquiror pick up all of the liabilities of your firm?
Worried about the SRA? Look at our CVA worries page where we refer to regulators. They do not need to be informed if the business is simply doing a Plan A or Time to Pay Arrangement
Call KSA Group’s DEDICATED LAWYERS LINE now 0845 5194930