By Legal Futures’ Associates Recovery First [1]
The legal sector has faced many difficulties over the past decade, making financial distress and law firm insolvency a dark reality for some businesses within the legal market. The last 12 months have been particularly challenging [2]for companies in all sectors due to the Coronavirus pandemic. Part of the legal sector has experienced growth and identified opportunity whilst others have contracted and taken advantage of government financial support.
Once that support is removed, a proportion of those businesses may struggle to remain financially viable. Corporate insolvency might be something those businesses have to deal with.
More legislative updates and reforms are on their way, more challenges will be met by some and, unfortunately, restructuring and insolvency may become a feature for others.
There are some steps which can be taken by Solicitors to help avoid law firm insolvency. Recovery First can help your firm by assisting in the sale of some of your WIP. If you are a law firm facing financial challenges, Recovery First can be of assistance throughout the process. The earlier it is addressed, the more that can be done.
Selling WIP Files as Part of a Solvent Strategic Exit
Recovery First assist and advise on all aspects of the WIP sale and provide guidance on the best approach that should be utilised for the run-off of files. One of our most successful approaches to WIP sales is by allowing firms to exit the market on a phased basis [3].
Using a phased approach allows the staff in the exiting department to focus solely on the files which are capable of settlement before a target date. This is achieved by identifying files which are unlikely to settle before this target date and transferring those files to our panel of Solicitors early using our usual file runoff methodology. Further reviews of files may take place throughout the process and where appropriate those files transferred to the panel at any point, with the remaining files being transferred on the target date.
Recovery First have many years of experience in advising and carrying out strategic exits from all legal markets.
Selling WIP Files Due to Law Firm Insolvency
There are a number of factors which may lead to law firm insolvency. Market and legislative changes along with Covid can all play a role in the creation of financial instability within any business. Following LASPO, we have witnessed the struggles faced by some Claimant personal injury Solicitors in particular.
The formal insolvency process for solicitors can be a lengthy one, and often involves input from the Solicitors Regulation Authority (SRA), as well as insolvency lawyers and insolvency practitioners. Quite often, we are approached by firms facing up to insolvency. We can assist by directing the firm to a number of appropriate experts, with a proven track record of working with law firms, providing the firm with options on which practitioner to use. It is really important that firms identify practitioners with experience of law firms as for a general practitioner there are many factors they will not have previously been exposed to, not least Client Accounting and the SRA.
If appropriate, we will then work closely with the insolvency team to complete a structured and compliant run-off of WIP files. We will aim to recover 100% of the firm’s WIP value by distributing the files to our panel of solicitors. On some of our recent projects, the outcome has exceeded expectation with the recovery of more than 100% of the expected WIP value.
About Recovery First
Recovery First offers a unique service to any law firm wishing to sell their WIP files. We provide a positive option for those wanting to exit a legal sector whilst remaining solvent and maintaining cash flow, or for those requiring a structured exit from the legal market.
Typically, those exiting are taken down a path of selling their WIP in bulk to a single purchaser, often at a heavy discount. At Recovery First, we offer an alternative approach to ensure you retain the value of your WIP in a fully outsourced, managed, and compliant run-off.
The unique scheme offered by Recovery First is suitable for both law firms and professional advisors. Our team manage the transfer of files from start to finish; placing case files with an approved law firm to protect the integrity of the client’s case, while at the same time maximising the value of the work in progress.
To find out more, visit https://www.recoveryfirst.co.uk/ [4]