If your law practice has severe cashflow problems and creditor or HMRC pressure is growing, it’s time to get support and advice on your options. Act now before the SRA takes action.
Its free to get initial advice from experts in turnaround, insolvency and liquidation such as KSA Group who own this website. We have been rescuing, restructuring, liquidating and selling law firms since 2003. Talking to experts (free) helps you understand this complex option and you will find it takes a lot of weight off your mind.
If the law practice is not viable or cannot be made profitable after aggressive restructuring, downsizing, turnaround or perhaps through a company voluntary arrangement for law firms or by using a pre pack administration then voluntary liquidation may be the most practical solution.
What Does Going Into Voluntary liquidation for law firms Mean?
Where the directors, or designated members of an LLP, have decided that the company has no viable future or purpose then a decision may be made to cease trading and wind up the company. Clearly such a decision should not be taken lightly and we would recommend that all other options are carefully considered by the directors. You should take advice from us on all options before making decisions of such huge importance and finality.
Above ALL else, before the liquidation process starts it is vital to speak to the SRA and get it involved. The SRA’s primary concern won’t be for the company or LLP, but for the clients, the client files and the client monies. The SRA will want to know that you have a plan for all three client issues BEFORE you go down the liquidation path.
There are two basic ways that the company or LLP can be wound up: the creditors petition and commencing a creditors voluntary liquidation.
A creditor can petition to wind up the company if debts of more than £750 are outstanding. This leads to compulsory liquidation by the Court. SRA will almost certainly intervene if a winding up petition is advertised and there is no plan to protect the clients. Speak to us URGENTLY if you have any threatened winding up petitions by creditors or by HMRC.
Creditors Voluntary liquidation: caution do not go down this path unless you have already taken advice from insolvency practitioners.
The liquidation process for in depth reading see our experts guide to creditors voluntary liquidation here
Once appointed the tasks of the liquidator are to
- Realise the assets in the company including any overdrawn directors loan accounts. All debtors, property and other assets will be collected by the liquidator.
- Investigate the conduct of the directors and officers of the company.
- The liquidator must also ascertain whether any transactions have taken place that put the creditors (individually or collectively) into a better position than they should be then such transactions (known as preferences or transactions at undervalue). If such transactions have been completed before the winding up, they can be un-done. (Antecedent transactions).
- The liquidator agrees the claims of creditors and eventually completes his /her work by making payments (called distributions) to the creditors in order of priority (if any distributions can be made).
Common sense dictates that allowing creditors to initiate compulsory liquidation proceedings indicates to creditors and the liquidator that the directors have failed to act in the best interests of the body of creditors as a whole. Clearly the regulators will be unimpressed too!
As a law firm you MUST inform the SRA if any winding up petition is served, or if you plan to enter into CVA, pre pack administration
If you fail to act or involve the regulators, then SRA will certainly intervene in the process and remove the clients files and seize the trust accounts. It is vital to discuss the plans to liquidate the company with the SRA at the earliest opportunity.
Before deciding to liquidate please review all the contents of this site and take advice from expert insolvency and turnaround practitioners who know the problems which law firms face. Call us on 0800 9700539. Or email us with your basic details and we will call you back at an agreed time and in confidence. firstname.lastname@example.org
Free and confidential advice from insolvency practitioners.
Our initial advice is always free. However, in advance of any meeting and issuance of engagement letters our regulators and the Insolvency Service (part of HM Department of Business Energy and Industrial Strategy) require all insolvency practitioners to obtain know your client (KYC) and anti-money laundering (AML) identification documents for all directors and shareholders holding >25% of the shares to allow us to proceed to advise the company. We will require up to date ID information including a photographic ID, such as a passport or driving licence PLUS a home utility bill or bank statement for each person.