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Friday, 15 August 2008

Limited Liability Partnerships; we are working with a number of LLP's to help them restructure. In one case a firm of solicitors with very high levels of bank debt approached us to see if a company voluntary arrangement for a LLP was possible.

Our normal policy is to go through all options for our prospective clients, we compare the advantages and disadvantages of administration, CVA, liquidation, receivership and so on. Then its a process of elimination and pick the most appropriate option - CVA of course!

In a law firm's case if it was to enter administration or receivership then under Regulation 8.2 of the Solicitors Recognised Bodies Regulations 2007, recognition of the solicitors will automatically expire if a winding-up order or administration order is granted under Part II of the Insolvency Act 1986, or a resolution is passed for voluntary winding-up, or an administrative receiver is appointed, in respect of a recognised body.

What does that mean in plain English?

Well simply the firm would lose all of its clients because the Solicitors Regulation Authority would remove the legal work and clients from the company to protect their interests, upon the granting of an administration order. In lay terms a SRA hit squad would arrive and remove all of the files and take control of the trust accounts etc.

So we suggested that a CVA was in the best interests of the bank, the unsecured tax and trade creditors and staff. Although an annual assessment of the members (lawyers) will be carried out by the SRA, the CVA does not lead to automatic breach and loss of the solicitors ability to practice.

Thus our CVA process will lead to an orderly reduction in bank debt, around 50p in £1 for tax, trade and VAT creditors and retention of around 60 jobs in this case.

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Many thanks for your comments. If you have a private business problem and you want advice give us a call on 0800 9700 539 or email me at keiths@companyrescue.co.uk. If you are a professional advisor with a troubled client, please suggest they visit www.companyrescue.co.uk or contact me as above.

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