In depth: Lawbites the dust - new-breed law firm rescue bid fails

The company behind an online service which promised to ‘democratise’ legal advice for small businesses will have its business and assets sold by administrators after falling over £5.8m into debt.

Administrators appointed to Lawbit Ltd have concluded that the business cannot be rescued as a going concern. The only option available is to wind it up, according to a Companies House document.

The firm’s subscription service and platform LawBite was established in 2014 by barrister Clive Rich, who told the Gazette that the service aimed to ‘declutter law for SMEs’. LawBite offered four tiers of subscription service to small and medium-sized businesses, to which it provided legal services through a new-model firm, Lawbriefs Ltd. The firm trumpeted its partnership with a challenger bank, Zempler.

But this year the LawBite offering unravelled. The Solicitors Regulation Authority shut down Lawbriefs Ltd; Zempler Bank dropped LawBite; and administrators Antony Batty and Hugh Jesseman, of Antony Batty & Company LLP, were appointed to Lawbit Ltd.

'All funding initially came from Clive [pictured] and Joanna Rich personally, in order to fund a beta [release] of their software platform and the next round of funding was raised via two successive Crowdcube raises totalling £440,000'

Antony Batty & Company LLP, administrators

Last month, when administrators were first installed, Rich told the Gazette the move was ‘part of a positive restructuring and investment plan’ which he maintained would enable the business ‘to continue with its mission to provide fast, affordable law to SMEs via its tech/AI, in the UK and the US’.  

It was not to be. An update from the administrators uploaded to Companies House on 21 November lays bare the company’s financial turmoil. It reveals that:

• The directors – Rich and his wife – had hoped to seek a pre-pack sale of the business, but HMRC ultimately issued a winding-up petition due to cashflow pressures.
• Some 33 creditors listed are owed a total of £5.8m. This includes £1.9m owed to secured creditors, including the Isle of Man Government.
• The administrators have concluded it is ‘not certain’ that a dividend will be paid to former employees and it is ‘unlikely’ that any dividend will be paid to unsecured creditors.

Lawbit Ltd was incorporated by Rich and his wife Joanna in May 2012 with the couple as majority shareholders. Rich has been a lawyer for over 40 years and during that period spent six years as a digital executive with Bertelsmann and Sony, and then 16 years as a tech entrepreneur.

‘All funding initially came from Clive and Joanna Rich personally, in order to fund a beta [release] of their software platform and the next round of funding was raised via two successive Crowdcube raises totalling £440,000,’ the administrator said. The business also raised funding by way of fixed and floating charges.

While ‘many millions have been spent by the company developing the platform’ which provided access to a marketplace of qualified lawyers charged out at competitive rates, Batty added that ‘the platform did not achieve profitability and required external investment/lending until a break-even volume was achieved’.

This arrangement initially worked well. ‘Lawbit successfully raised the required investment, totalling £7m, from over 400 investors. However, the cost of developing and maintaining the technology was significant and reduced the amount of investment available for marketing requirements. Further investment was adversely affected by difficult economic conditions, and potential funding was slow to complete or did not ultimately materialise,’ the report states.  

The company was able to sustain itself for a while with short-term borrowing, including £500,000 secured against the directors’ home in May 2022, but the developing shortfall required further steps. All staff were made redundant in May 2024 and the company was effectively mothballed; since then limited services have been maintained by the directors, Batty reported.

Following the winding-up petition, the joint administrators were appointed by ADG Corporate, which holds a floating charge worth £975,116 over Lawbit’s assets.

The company’s management accounts showed an operating loss of £806,349 for the period ending 30 April this year.

Batty concluded the company could not be rescued as a going concern because no purchaser could be found and due to the effective cessation of trading.

No better result could be achieved for the company’s creditors than if it were wound up. The only known preferential creditors are former employees of the company, at least one of whom has succeeded in an Employment Tribunal claim for unpaid wages. However Batty remarked that ‘it is not certain that a dividend will be paid to preferential creditors’. As for unsecured creditors, any dividend is ‘unlikely’.

Overall, Lawbit’s fate is a cautionary tale for those hoping the access to justice crisis can be solved by technology.

This article is now closed for comment.