Insolvency practitioners are poised for a legal battle with the Solicitors Regulation Authority over the fallout from the collapse of north west firm Asons.
In a progress report published earlier this month, joint liquidators confirmed they are seeking legal advice over funds being held back by the SRA following intervention into the controversial firm and its successor last year.
The SRA intervened in Asons in March 2017 and three months later took the same action with Coops Law, which had purchased the business and assets of Asons. Following these interventions, the regulator requested that the office account and client accounts be frozen and an estimated £430,000 transferred to it from the firm.
The liquidators said they had attempted to broker a deal with the regulator to help pay back some of the £25m potentially owed to unsecured creditors. Following negotiations, the parties signed a settlement agreement last summer whereby the SRA would retain £100,000 against intervention costs and release the balance to the joint liquidators. This would have released around £217,000 into the liquidation estate,
The SRA had estimated its costs could reach as much as £150,000 plus VAT and disbursements and by August 217 it had spent around £92,000 on the interventions: once this figure tipped over £100,000, according to the agreement, the SRA would become an unsecured creditor for the purposes of the liquidation.
But the SRA and liquidators were forced into further talks over sums that appeared to include money held for clients and third parties. By May 2018 the SRA confirmed that it now proposes to release a ‘significantly’ lower amount into the estate.
The liquidators' report added: ‘The liquidators are taking legal advice on the SRA report produced on 9 May 2018 and will take steps accordingly in line with legal advice.’
An SRA spokesperson said: 'The relationship between interventions and the insolvency regime is quite complex and we cannot discuss specific cases. Our priority is always to make sure that former clients do not end up out of pocket because of solicitor misconduct, and then to recover the costs of any intervention so that the cost of taking the necessary action is not passed on to the wider profession.'
Irrespective of the outcome of the dispute between the SRA and liquidators, the fallout from the Asons collapse is likely to be costly for unsecured creditors. Claims totalling £25m include one for £1.4m from HM Revenue & Customs. Dividend prospects are said to be ‘presently uncertain’.
The joint liquidators have also confirmed they are investigating allegations raised by creditors that the purchase of Asons by Coops Law ‘did not take place at arm’s length and for full value’. The sale was worth almost £230,000 and is considered an ‘associated party transaction’. The report states: 'No formal valuation was undertaken of the goodwill, work in progress and book debts, and limited marketing of the business was conducted.'