Former owners of a south-east law firm have bought back the business through a pre-pack administration and written off seven-figure debts, the Gazette can reveal. A report prepared by administrators states that Foster Mackay (trading as Fosters Law) entered administration earlier this month.
The firm, mainly based in Kent and focused on conveyancing work, had suffered in recent months from the effects of a cyber-attack and lenders pulling the funding.
A statement of administrators’ proposals, prepared by Surrey firm Turpin Barker Armstrong, reveals the business is now being split into two.
Pre-pack sales of the company to The Foster Partnership (TFP) Limited and County Solicitors Limited were completed last month.
Edward and Christina Foster, both shareholders in Fosters, are named as director and shareholder in TFP, along with another director who was previously a director at Fosters. Edward Foster appears again as chief executive and shareholder in County Solicitors, along with five directors who were all directors at the previous incarnation of the firm.
The total sale to TFP is worth £120,000, while County Solicitors has acquired its share of the business for £20,000. The deal allows existing staff to be kept on across Fosters’ 10 offices in Kent and Lincolnshire.
Meanwhile, unsecured creditors are owed more than £1.6m and could receive anything from 13.24p in the pound to nothing.
This group includes HM Revenue & Customs (owed almost £900,000) and Lloyds Bank, owed £10,000. Outstanding redundancy and notice payments come £324,000.
The report states that the deal agreed is the best option for staff and creditors of the firm. ‘The sales to the purchasers have maximised realisations for creditors and avoided substantial employee and leasehold liabilities. Further, the existing practice loans have been novated to the purchasers which has reduced the company’s overall deficiency and will increase the amount received by the company’s creditors.
‘No other offers were received for the business and, in view of the outstanding petition, the only other alternative would have been the liquidation of the company which would have provided no return to creditors and meant all staff would have been made redundant.’
The report recounts that Fosters had been incorporated to take over another solicitor’s practice in 2011 and had grown turnover to almost £4m in 2015/16.
But profits were hit following an attack by online fraudsters in August 2015, resulting in the theft of £1.1m from the client account. Although the company’s professional indemnity insurers covered these losses, the premium rose sharply the following year.
The company had taken out loans but this facility was withdrawn and Fosters was unable to pay its VAT liability to HMRC for the May 2016 quarter.
Savings of £250,000 a year were made through cutting staff and other costs, but the company was unable to trade through its difficulties.
Creditors lose £1m-plus as former directors buy back fraud-hit firm
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