Law Sector

Recent Law Firms We Have Rescued

Case Study 1 – Solicitors’ Practice Rescued Through CVA

Our Client is a long-established London law firm based in South West London. The practice traces its roots back to 1934 and provides legal services across conveyancing, private client, matrimonial and family law, dispute resolution and personal injury. The firm had also held the Law Society’s Lexcel quality mark for 20 years and had a strong base of repeat clients and referrals.

Despite this strong history, the business came under severe cashflow pressure following a combination of difficult trading conditions. The firm had continued to service borrowing, rent and loan repayments during the Covid period. Further pressure came from a seasonal fall in conveyancing work during autumn and winter 2022, rising interest rates and uncertainty in the housing market. Two key fee earners also left the business, creating a gap in the conveyancing department and reducing billing at a critical time.

By January 2023, the partners recognised that cashflow was becoming increasingly stretched. Turnover had fallen from an average net income of £79,000 to £59,000, and the LLP was unable to meet all debts as they fell due. After taking advice and considering the available options, the partners decided that a Company Voluntary Arrangement was the best route to maximise returns to creditors while allowing the firm to continue trading.

RMT worked with the LLP to prepare the CVA proposal, detailed financial forecasts and an estimated statement of affairs. As this was a regulated solicitors’ practice, careful communication with the Solicitors Regulation Authority was also essential. RMT liaised with the SRA throughout the process and provided regular updates, including what steps were being taken, how the CVA was progressing and what creditors were saying. This transparency helped the regulator remain informed and supportive, avoiding unnecessary intervention while the rescue plan was put together. The original engagement also specifically included negotiating with the SRA and regularly reporting to them.

The restructuring plan included a review of overheads, staffing and property costs. Two redundancies were made, one office was closed, and the firm negotiated a short-term rent reduction on its main premises.

The CVA proposal allowed the LLP to pay creditors £299,100 over five years. Preferential creditors were forecast to receive 100p in the £, while unsecured creditors were forecast to receive 10p in the £. The arrangement also preserved eight jobs, with Barclays Bank agreeing to continue providing the existing loan and overdraft facilities.

The CVA was approved by creditors and the business has continued to trade. By using a CVA, the partners were able to deal with historic debt, reduce creditor pressure, restructure costs and protect the ongoing value of the firm.

Case Study 2 Property Law Firm Given Five-Year Lifeline Through CVA

Our client was a regulated property law firm dealing with residential and commercial conveyancing work. The company operated as an Alternative Business Structure and was regulated by the Council for Licensed Conveyancers. At the time of RMT’s initial review, around 90% of its work related to residential property transactions, with the balance made up of commercial property and estate planning work.

The business had grown quickly, with turnover of around £1.6m, but came under severe financial pressure following a shareholder dispute. This led to substantial legal costs and diverted management time away from the day-to-day running of the firm. The company also had significant HMRC arrears, including PAYE/NIC, VAT and corporation tax, as well as trade creditor pressure and bank borrowing.

The directors believed the business remained viable if it could reduce overheads, refocus management and move away from lower-margin residential conveyancing work. A turnaround plan was developed which included relocating away from expensive central London premises, reducing fixed costs and building more profitable streams of work. The company moved to regional offices in Cheam and Buckhurst Hill, producing annual property cost savings of approximately £147,000.

RMT worked with the directors to prepare a Company Voluntary Arrangement proposal, including financial forecasts, an estimated statement of affairs and creditor communications. The CVA was structured to allow the company to continue trading while repaying creditors from future profits. The proposal forecast sales of £1.697m in the first 12 months of the CVA and aimed to repay unsecured creditors in full over five years. It also preserved 15 jobs and allowed NatWest to continue providing overdraft facilities.

The CVA was approved by creditors and the company continued to trade for five years. Although the business later failed following a more aggressive expansion plan, the CVA achieved its core purpose at the time: it avoided immediate liquidation or administration, preserved the business, protected jobs and gave creditors a far better prospective return than the estimated nil return in terminal insolvency.

This case shows how a CVA can provide a viable business with the breathing space needed to restructure, deal with historic debt and attempt a recovery, even where the longer-term outcome depends on future trading decisions.

Case Study 3 Law Firm Rescued From SRA Intervention Through CVA

A law firm faced a critical financial crisis after a number of serious issues came together at the same time. The firm had acquired a smaller practice, but the expected bank funding for the purchase was never provided, which became a significant drain on cash. The bank then reduced the firm’s overdraft, while a bad debt, falling fee income and pressure from VAT arrears forced the company to borrow money from former clients to meet VAT liabilities, creating expensive “VAT smoothing loans”.

Cashflow problems were made worse by a rent increase on the firm’s main office and the wider pressure affecting parts of the legal sector, particularly personal injury work, where recoverable fees had reduced significantly. The firm had already undertaken major restructuring, including reducing staff numbers and investing in IT systems and remote working, but historic debt pressure remained. The company was also authorised and regulated by the Solicitors Regulation Authority, meaning regulatory confidence was essential to any rescue plan.

The situation reached breaking point when the firm missed two consecutive PAYE payments, prompting HMRC to threaten winding-up action. The SRA also warned the board to seek insolvency advice or risk intervention, an aggressive process that could have effectively shut the firm down. With debtors of around £500k and work in progress of around £1m against borrowings and creditor debts of nearly £3m, the firm was insolvent.

The Solution

Following an initial consultation, RMT was engaged to develop a comprehensive recovery strategy. The plan centred on a Company Voluntary Arrangement, but also included a contingency plan for a pre-pack administration if creditor or regulatory pressure could not be contained.

The strategy involved closing non-performing offices and transferring clients either to other firms or back to head office. Approximately 20% of employees and two partners were made redundant, with qualifying claims met by the Redundancy Payments Office. RMT also negotiated a 60-day debt standstill with creditors, allowing time for detailed financial modelling and a properly structured CVA proposal.

Costs were reduced significantly. The firm vacated leased premises in Birmingham, moved to smaller premises, and used IT investment to support more flexible working and a leaner operating model. The CVA proposal recorded that the office move alone produced savings of around £130,000 per annum, while reduced staff numbers and improved systems allowed the firm to maintain client service with a smaller team.

RMT also worked closely with the SRA and the bank. This was critical. In a regulated legal practice, a CVA is not just a creditor negotiation; the regulator must be satisfied that clients, files and professional obligations are protected. By keeping the SRA informed and demonstrating a credible restructuring plan, RMT helped avoid regulatory intervention.

The Results

The CVA was approved, preventing SRA intervention and avoiding a pre-pack administration. The firm became much leaner, with two properties vacated, employee costs reduced and major overheads cut.

The approved CVA provided for creditors to receive £316,800 over five years, including repayment of a director’s loan account balance. Unsecured creditors were forecast to receive 31p in the £, compared with an estimated 2p in the £ in terminal insolvency. The proposal also preserved 41 jobs, and RBS continued to provide both overdraft and loan facilities.

The first-year CVA contributions were deliberately set at a sustainable level, rather than overburdening the business immediately. This was a major contrast to the previous position, where the company had been paying around £25,000 per week on VAT smoothing loans. Salaries were frozen for two years, future HMRC liabilities were brought under control, and bank loans were serviced after a capital repayment holiday.

RMT provided senior director-level support on site during the crisis, backed by a team of experts dealing with creditors, the bank and the SRA. This case demonstrates how a CVA can be a powerful restructuring tool for a regulated professional firm: protecting clients, preserving jobs, reducing creditor pressure and giving a viable business the chance to recover.