Struggling Law Firm? How to Avoid SRA Intervention.

Law firm with cashflow problems? How to avoid?SRA intervention into your distressed law firm.

We are currently dealing with seven distressed law firms across the United Kingdom ranging in scale from two partner practices through to larger firms with fee income in the ï¿¡10-20 million bracket, some with over 220 employees.

With the advent of artificial intelligence, the aging of many principals and lack of succession planning or succession options,?many hundreds of UK law firms are finding life very tough.?The obvious signs of the firms illness manifest themselves in cashflow.

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Common denominators in the distressed law firms KSA meets

·????????A constant habit of refinancing loans to pay VAT. Pay one quarter off, then borrow again to pay the next VAT quarter. Whilst never quite getting out of this debt cycle.

·????????Struggling to obtain and fund PII?cover.

·????????Multiple loans from banks and alternative funders. One recent case had 13 different lenders.

·????????Loans from partner, designated members or directors which seem to increase not get repaid.

·????????Reticence to downsize overheads, in case lots of new work comes in.

·????????An ability to forecast cashflow. Or more usually a complete absence of any forecasting for cash or income – aka driving blind in the dark.

·????????Reluctance to cut employment numbers, to right size employment costs to fee income. Usually because redundancy costs are deemed unaffordable.

·????????Failure to invest in new technology and different ways of doing things.

And lastly….

·????????THE common denominator for ALL of our clients, waiting until its nearly too late to get professional restructuring and turnaround advice.

Does this sound more than a little like your firm? Are you putting your firm at risk of the SRA intervention process?

So far in 2023 we understand more than 10 law firms have been intervened in by the regulator. This is a significantly higher number than before.

Now, what’s the solution and how do you prevent intervention by the regulators? Here is KSA’s three step action plan:

1.??????Don’t wait any longer, ACT NOW, get professional turnaround advice, from licensed insolvency practitioners with extensive experience working with law firms and their regulators. One phone call is all it takes to get rapid support, expertise and someone to talk to about your worries. You can call me personally in confidence on 07974 086779. Email me keiths@ksagroup.co.uk

2.??????Be prepared to listen and then read our reports on your business issues (which is our unique free service for struggling law firms). This strategy report will set out the recovery plan, the proposed timetable and or costs. Our fees are agreed in advance and paid over time if a rescue and restructure strategy is agreed. If a liquidation is required we will move quickly to help you act properly.

3.??????Instruct KSA to work with your firm and interface with the regulators, deal with the banks and lenders and help YOU avoid intervention. Then get some sleep!

Downsizing, rightsizing, addressing the cost base and overheads, reducing time spent on repetitive processes, improving cashflow forecasting, focusing on marketing and lead generation ALL coupled with?a restructuring of overwhelming debt IS the solution.

This can be wrapped up into a turnaround led process called a company voluntary arrangement, see our guide here. Since 2004 when we wrote the first CVA for a law firm in the UK, we have used the flexible and powerful?process to restructure many law firms?

Additionally we occasionally use the process of preparing draft CVA proposals for law firms Then we lead INFORMAL DEBT negotiations?with larger creditors to seek to AVOID the use of a formal insolvency like a CVA. In a recent case KSA has successfully negotiated the restructuring of nearly ï¿¡3.3 million of unsecured debt along with a five year extension negotiated with the secured lender on a CBILS loan of ï¿¡500k. HMRC was owed ï¿¡1.16m and has agreed a long term payment plan. 200 jobs saved.

Other firms have reached the end of the road and we ensure the liquidation process is carried out.

But what is the regulator's view? Once engaged by our clients, our law firm turnaround experts work closely with the regulator and the various departments of the SRA, to ensure transparency, with open and honest dialogue 1-3 times a week. Thus, the regulator is kept appraised by a firm of licensed insolvency practitioners, which is providing guidance to the partners, designated members or directors of a distressed law firm.

If your practice has cashflow problems and pressure is growing, it’s time to get support and advice on your options. Its free to get initial advice and you will find it takes a lot of weight off your mind.

Remember, partners, directors or designated members can call me personally in confidence on 07974 086779. Email me keiths@ksagroup.co.uk