A nascent law firm took a catastrophic financial hit after failing to spot in time that its office phone system was not working correctly, administrators have revealed.
A report into the closure of Kent firm Tiger Law Ltd said that the company had retained an unnamed telephone service provider as a point of contact for potential clients. But a fault in the system resulted in the firm missing out on around 70% of all incoming calls. The issue continued for ‘many months’ before management spotted it but in the meantime the lack of new business had weakened the firm’s financial position.
The firm, established in 2017 in Maidstone, appointed administrators from insolvency specialist Quantuma last month.
At one stage Tiger Law employed 14 people, offfering services in conveyancing, mergers and acquisitions, commercial contracts, wills and probate and litigation. The business made a small profit in 2021/22 but then reported a £46,000 loss on turnover of £765,000 the following year.
The firm told administrators that the insolvency was in part due to an error by an external accountant at the beginning of the pandemic which resulted in an unplanned VAT liability. This, coupled with expansion and what was described as ‘poor recruitment’, led to the company taking on short term loans.
In the 2023/24 year, the firm was forced to pay ‘other expenses’ of more than £220,000 which wiped out gross profits.
Tiger Law had further issues with an internal office and accounts manager who failed to pay PAYE for almost a year. One director took a loan with a view to settling the short term loans and trade creditors, but this was less beneficial than expected. The loan is secured on the director’s home and is personally guaranteed.
The business was sold through a pre-pack arrangement with fellow Kent firm Silverstone Law for a total value of £50,000. To date, £10,000 has been received and the remainder will be paid in monthly instalments. The eight remaining Tiger Law employees had their employment transferred under TUPE.
A Silverstone director, Vanessa Challess, was a director and shareholder at Tiger Law. Under 'Disadvantages of the proposed transaction' the administrators' report states: 'In addition to the lack of certainty as to the price to be paid by the purchaser, there is a general lack of transparency which may cause concern to some creditors given the connection or perceived connection between the company and the purchaser and the purchaser’s being a connected person.' However the report concludes that the proposed deal is the best that could be achieved.'There does not appear to be any viable alternative achievable within the administrators’ timescales or at all.'
At the time of administration, the company had total liabilities of almost £980,000, the majority of which was due for payment within a year. Unsecured non-preferential creditors, collectively owed almost £300,000, are likely to receive no dividend.
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