Just one year into its contract to oversee the managed and compliant run off of 800 personal injury files for a Manchester-based personal injury (PI) law firm that was facing insolvency issues, PI-Solutions has already liquidated over half the value anticipated to be locked up in the work in progress (WIP) at the point of being instructed and is outperforming the target set for year one by more than 50%.
PI-Solutions, which offers an ethical and equitable solution to PI law firms considering their options in the market, was appointed to work with Delta Legal in 2014. Over the last year, panel firms have successfully settled around 45% of the case load, realising some £650,000 for Delta Legal, net of fees, from the firm’s existing WIP, which had a balance sheet value slightly in excess of £1m.
By entering into an individual voluntary arrangement (IVA), Delta Legal was able to avoid a distressed sale and instead achieve the orderly wind down of the business in an SRA compliant manner. It’s a process that shows partner/owners can avoid bankruptcy and retain their practising certificates.
The documentation governing the arrangement with PI-Solutions was prepared by JMW Solicitors and sees PI-Solutions facilitate five panel firms and undertake the transfer process. It continues to monitor the liquidated value flowing to Delta Legal on case conclusion and, in the meantime, Delta Legal is supervising and managing its own orderly wind down.
Managing director at PI-Solutions, David Johnstone said: “We’re delighted to be making such headway with Delta Legal’s voluntary arrangement as it proves our model works extremely well. In the case of Delta Legal, we’re significantly ahead of the year one target. We thought we would see 40 per cent of anticipated recovery value within the first year, but we’re actually nearer 60 per cent of the value on the balance sheet at the point of our involvement. This is likely to culminate in a situation where the sums realised for WIP exceed the expectation at the point of appointment. The whole process for Delta Legal will last for three years, therefore with a significant volume of matters still to conclude over the next 24 months and a residual to then be capitalised, we’re hopeful we’ll exceed the balance sheet value on behalf of the firm.
“Entering a voluntary arrangement buys a law firm time. There will be many firms where, on a balance sheet basis, they are solvent but cash isn’t flowing quickly enough to address their liabilities as and when they fall due. In such situations it may be possible to manage the situation on a completely informal basis, but the use of a voluntary arrangement provides certainty and they should be able to pay off all their liabilities as the asset is liquidated, retaining the balance of the realised value for themselves.”
PI-Solutions was launched in 2013 to assist – by brokering a sale and/or offering a fully managed and compliant run off – firms of solicitors involved in PI that no longer wish to take on any more work. It discreetly identifies multiple purchasing law firms, which are willing to place a higher value on the WIP and focus on the value generated in taking cases from the point of transfer through to conclusion.
In addition, these purchasing firms do not require to perform due diligence on the files concerned so the spirit of recent SRA guidelines on client confidentiality is met when involved in M&A activity. In fact there is no access to the files required until the transaction is concluded and the claimants have consented to the transfer of the files. This is believed to be unique in respect of claimant PI where the quality of the actual work on the file is central to the transaction.
For further information about PI-Solutions contact 01737 747 035 or email firstname.lastname@example.org