Dozens of creditors collectively owed around £3.6m by a collapsed London firm are unlikely to see a penny back, administrators have revealed.

The firm handling the affairs of Hodders Law Limited said just £303,000 is likely to be left in total assets once work in progress has been realised and costs have been taken out.

That will cover the £65,000 owed to staff in salaries, holiday pay arrears and unpaid pension contributions, but will leave just £238,000 to contribute to paying off an outstanding bill to HM Revenue & Customs. It is listed as a preferential creditor but will claw back a fraction of the £1.85m it was owed when the firm went under in September.

According to the statement of affairs published this month by administrators from Quantuma Advisory, there is then almost certainly going to be nothing left to reimburse unsecured creditors, including some employees, who are together owed almost £1.8m.

The Hodders workload was bought by three firms as part of the pre-pack administration: Taylor Rose MW purchased the conveyancing and commercial property files for £110,000, Jaffe Porter Crossick will give back 40% of the proceeds from litigation and probate files (likely to be around £40,000), and Hunters Solicitors LLP will pay around £10,000 from family and other litigation matters.

Hodders Law went into administration in September after trading for 150 years. At the time of its closure it had 40 staff working from four offices.

An earlier report from Quantuma explained that the firm had historically been profit-making, with net profit of £78,560 for the year ended 31 July 2019 and retained earnings of £186,740. But within a year the firm was reporting a net loss of £70,245 and retained earnings of less than £70,000.

Directors advised that the business suffered increased overheads following the onset of the pandemic, particularly with extra indemnity insurance costs and staffing costs. Profitability on various work types also suffered from what was described in the report as ‘competitive pressures’.

Quantuma was approached in August this year to help advise on the options available, including a costly potential intervention from the Solicitors Regulation Authority. The firm had by then accrued significant liabilities to HMRC over the course of the pandemic and tried to restructure these through a ‘time to pay arrangement’. Whilst this was agreed, the agreement was breached when Hodders Law missed a payment, and HMRC subsequently issued a winding up petition.

To continue trading, the firm needed extra funding above the level available from its existing facilities, and neither the business, its directors or shareholders were in a position to invest any more. The granting of the administration order ensured that pre-packaged sales could take place and the SRA did not need to intervene.

Quantuma’s pre-administration costs were capped at £50,000, with legal costs and expenses coming to £72,000 to cover work carried out prior to administration by national firm Pinsent Masons. Administrators estimated their fees and expenses for future work would be around £75,000, based on 134 hours’ work being carried out at an average hourly rate of £379.

 

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