Administrators handling the affairs of a folded litigation funder have recouped enough from law firms to pay back a significant proportion of debts.

In a progress report for VFS Legal, which closed in 2023, administrators confirmed that a further £3.9m has been paid to the company’s one secured creditor in the last six months. This brings the total payments to investor OSB up to £22.2m, with a further dividend likely at a point in the future.

Preferential creditors owed £74,000 have been repaid in full, while unsecured creditors, whose claims come to £9m, have received what is likely to be a final dividend of 5.34p in the pound.

Accounts for the year ended June 2022 had shown that VFS Legal had debts of almost £39m but was owed £49.6m by law firms. The repayments that have been possible for creditors will have come through recovering loans taken out by firms. 

VFS Legal was a significant presence in the claims sector, providing £150m in funding over eight years to back more than 25,000 cases. It was a key sponsor at legal conferences and industry events.

But the business suffered when claims firms started to go under and loans could not be repaid. Earlier this year, the administrators’ report for closed Liverpool firm High Street Solicitors revealed that VFS Legal and one other secured creditor would receive only a ‘nominal dividend’ from the £9m they were collectively owed.

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During the past six months, administrators from professional services firm Alvarez & Marsal have incurred time costs of almost £284,000, representing 566.5 hours at an average rate of £501 per hour. The administrators said they expected that their fees will exceed the original estimate of £1.5m, predominantly because of the additional costs of recovering debts.

VFS Legal employed 17 people from its based in Bromley, Kent.