The administrators of collapsed law firm Halliwells have written to former equity partners demanding the repayment of a £20m ‘reverse premium’ which the partners shared when the firm moved into new premises in Manchester.
BDO confirmed it wrote to the partners last week demanding they pay back the cash, as the insolvency firm seeks to maximise returns to Halliwells’ many creditors.
Halliwells, formerly one of the UK’s biggest regional law firms, collapsed early in 2010 following a steep decline in profitability resulting from the recession. Net profit peaked at £8.5m in 2006/07 before the downturn took hold. The firm recorded a loss of £1.8m in 2008/09.
Attention immediately focused on the legacy of a multi-million-pound reverse premium paid to Halliwells some years ago when it agreed to move into headquarters in Spinningfields, dubbed Manchester’s ‘Canary Wharf’. About 75% of that premium, understood to exceed £20m, was distributed to equity partners, most of whom are understood to have left the firm before it fell into administration.
The firm was subsequently run on borrowed money, with RBS taking a security over its assets. RBS was left without outstanding loans of £18m when the firm went into administration.
The bulk of Halliwells was carved up by four rivals – Hill Dickinson, Kennedys, Barlow Lyde & Gilbert and HBJ Gateley Wareing – to which most LLP members and staff transferred.