Frustration amongst creditors of struggling UK law firms continues to grow. Administrators of Challinors have concluded that the partnership's unsecured creditors, owed approximately £7.1m, are likely to receive nothing. Meanwhile the Solicitors Regulation Authority (SRA) has advised 141 firms that they must prepare to shut-down following their failure to obtain professional indemnity cover. These firms are currently in the middle of a 60 day cessation period during which they may remain in business, but cannot accept any new instructions. While some have blamed the increasing regulatory and compliance requirements imposed by the SRA, others have expressed frustration that the SRA have not named these firms and accordingly the public are unable to protect themselves and their funds.
The 450 partners of failed US firm, Dewey & LeBoeuf, are being pursued by the firms' former landlord for £1.6m of outstanding rent. Similarly, banking giant, Barclays, is seeking summary judgment against three former Dewey partners for outstanding debts. After emails emerged of one Dewey partner calling his colleague a "f*ckw*d", "little prick" and "pathetic", this is all negative publicity the former partners, trying to make a fresh start, do not need.
However, when insolvent UK firm Manches was bought out by its rival Penningtons, huge criticism was directed, not only at the individuals involved, but also at the profession as a whole. The terms of the sale saw Manches' massive debt wiped, but its business survive. Some commentators claim that the case illustrates that law seems to be "becoming a profession without any shame" and others have called for the SRA to provide guidance as to whether this method of clearing debt is acceptable behaviour by solicitors.
The outrage directed at Manches has been exacerbated by revelations of the firm's management practises from the firm's administrators, PwC. The firm increased its £6m overdraft facility by £400,000 after it became clear that it was going to breach the facility. This was before the firm was faced with a £715,000 tax bill (of which it could only pay £90,000) which was ultimately the cause of its demise. However, despite such onerous debts, the firm had work in progress (WIP) of £4.7m, approximately half of which was over 120 days old and therefore difficult to recover.