A foundering law firm was bought by a rival for 30% of its value, leaving unsecured creditors almost penniless, a new document has revealed.
A statement of administrators’ proposals into the fallout from the failure of insurance specialist Triton Global has confirmed that national firm DWF agreed a £1.1m deal to buy it last month.
The acquisition was agreed as part of a pre-pack administration days before an attempted winding-up petition by HM Revenue & Customs over an unpaid £1.3m bill.
Administrators FRP Advisory confirmed the sale achieved 30p in the pound for money owed and work in progress, for a value of £1.115m. DWF will also take on pension arrears of £345,000.
But around 200 unsecured creditors face a shortfall of almost £4.9m after being prescribed just £174,000 from the proceeds of the sale.
These creditors include Wesleyan Bank, owed £1.2m, and HMRC, which is owed a total of £2.4m. Barclays Bank is also owed £2.6m through a loan and overdraft facility.
It is understood Wesleyan may enter a repayment agreement with former Triton directors and DWF.
The document sets out that FRP was introduced to Triton in October 2016 to review the financial forecasts after the business suffered two years of cashflow issues.
The company had acquired the LLP Robin Simon in 2003 and acquired shares in loss-adjuster Walsh PI Limited, before bringing all the businesses together in August 2013 under an alternative business structure licensed by the Solicitors Regulation Authority.
The UK business employed 191 people and was based in Leeds, Manchester, Birmingham, Bristol and London.
Turnover increased from £12.7m in 2013/14 to £17.3m in 2015/16, but net profits were slow to materialise: two years ago Triton reported a £28,000 loss, while profits for the last financial year were £208,000. In the three months to October 2016, the company lost £61,000.
During the course of 2015 and 2016, the company struggled with increased lock-up of work in progress.
The statement adds: ‘Cash pressure mounted and whilst it tried to cover its working capital requirements with third-party funding and the restructure of the bank debt, the impact of this situation coupled with clients extending their credit terms, became severe and difficult to manage.’
A repayment agreement was made with HMRC in June 2016 but was terminated three months later after Triton failed to make certain payments on time.
In December 2016, following an emergency meeting of Triton’s board of directors, the company offered to repay half the arrears over the next three months, but the winding-up petition had already been issued and the company’s bank accounts were frozen.
FRP said directors explored all options in an attempt to save the business and avoid formal insolvency or an SRA intervention. The eventual deal with DWF was said to represent a ‘good value given the nature of the debt and general expectations of asset realisations within legal firms’.
The costs of the administration are estimated at £244,000 as of the end of January, with hourly charge-out rates for partners set at £495. International law firm Pinsent Masons is expected to charge £64,442 for legal costs associated with the administration.
Creditors lose £5m as failing law firm sold at knock-down value
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