A national firm was forced into administration after struggling to pay back loans taken to survive the Covid pandemic, a new report has explained.
Administrators handling the affairs of Youngs Law said in a report published this week that the firm had been successful until as recently as last year, when it reported net profits of £317,000.
But the business closed last month, with directors attributing the failure of the company to its inability to service historic loans obtained during the pandemic, together with the high level of staffing costs.
Net assets plunged from £491,000 in April 2022 to just £739 in April this year.
The report by insolvency firm Quantuma stated that Youngs Law had been incorporated in 2014 and traded from five offices, the biggest of which was in Havant, Hampshire. It specialised in personal injury and clinical negligence but also handled prison law, family matters, conveyancing, probate and wills.
The company had been under pressure from its creditors after defaulting on certain loan repayments, including the amount due to the financier of its professional indemnity insurance premium.
Quantuma was enlisted by the directors in June to assist with the managed wind-down of the company and the transfer of clients to other firms. File transfer specialist Recovery First was brought in to find alternative solicitors for the PI and clinical negligence claims. Work in progress valued at £1.25m was sold to five different firms. Deals were later agreed to sell the rest of the work to four firms for a total of £11,500.
Administrators said that if the company had not entered administration when it did, the SRA would have likely intervened.
Immediately following the appointment of administrators, all 43 staff were contacted to confirm they had been made redundant. The employees have preferential claims worth around £46,000 which are expected to be paid in full.
Unsecured claims come to almost £2m, including £834,000 in trade creditor claims and a further £259,000 owed to employees. There is not expected to be enough realisations to pay anything back to unsecured creditors.
Total pre-administration costs come to £56,000, of which £10,000 is legal costs. During the administration a further £25,000 is expected to be incurred in legal costs, while Recovery First will incur £125,000 in fees for assisting in the transfer of files.
