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UK law firm partners warned about insolvency
Law firm partners could face significant personal costs if their firm ceases to trade without a successor practice in place, according to a Baker Tilly report.
A recent Baker Tilly report warns law firm partners of possible intervention costs Economia
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While the report gives advice about reducing risk of financial disaster, it found that half of partners are unaware of the effect that their firm’s insolvency would have on them personally.Without a successor in place, the Solicitors Regulation Authority (SRA) can take steps to protect the firm’s clients by intervention, with the costs being borne by the firm’s partners. This will include the costs of collecting and protecting both live and closed client files, as well as returning them to the client. Any appointed insolvency practitioner would also review drawings taken by partners and request repayment of overdrawn current accounts.
Costly for individual partners
‘All possible steps should be taken to avoid an unplanned cessation of business which can be very costly for individual partners,’ said George Bull, Chair of Baker Tilly’s professional practices group. ‘However, all too often, partners don’t take action in time, either because they fail to pay sufficient attention to their cashflow, or because they wilfully bury their heads in the sand.’New entity-based regulation now gives the SRA a more active role in monitoring firms’ financial stability, which is now under pressure more than ever before. Baker Tilly is the trading name of a number of separate legal entities with over 4,000 partners and staff operating from 50 offices in the UK.
