Administrators for the stricken legal finance provider VFS Legal are contacting law firms this week with a view to discussing repayment plans.

The Gazette revealed on Tuesday that VFS had filed papers with the court giving notice of its intention to appoint an administrator.

In a short statement today, financial firm Alvarez & Marsal Europe LLP confirmed that it was handling the company’s affairs, with Sarah Collins and Mark Firmin appointed as joint administrators. Alvaraz & Marsal is also handling the administration of Virtual Business Operation Services Limited, the service company which supports VFS.

The company, which provides cash flow to law firms to support the progress of claims, employs 17 people at its site in Bromley, Kent.

It is understood that the business became insolvent as a result of being unable to secure long-term financing. Accounts for the year ended 30 June 2022 showed that VFS Legal owed £38.7m within the next year, mostly in the form of a bank loan for £35.6m which required ‘significant repayments’ until September 2024.

The accounts had also stated that, as of last June, VFS Legal was owed around £49.6m by law firms who had agreed financing arrangements.

It is understood that administrators are exploring all options for the business, including finding a buyer for VFS Legal as well as collecting the current book debt from law firms. There will be no further offers of credits and administrators will be in contact with those provided with funding in the past.

VFS Legal has provided £150m in funding over the past eight years for more than 25,000 cases, and has become an almost ubiquitous presence at legal conferences and industry events. It sponsored this year’s AvMA charity golf day and has previously backed the Modern Law Awards and Association of Personal Injury Lawyers annual conference.

In 2016, VFS secured an initial facility of up to £20m from OneSavings Banks to finance growth and development, on the back of a growing loan book and increasing demand.

In 2020, the company announced a partnership worth £30m with national firm Slater and Gordon to accelerate its growth plans and fast-track investment in its new technology programme. 

In a statement this week, Slater and Gordon said it had not drawn on funding from VFS for some time, and its administration had not come as a surprise. The firm had planned accordingly and as a result, VFS’s collapse was not expected to have any impact on day-to-day business.

 

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