Cyber attacks hindered rescue of stricken Birmingham firm

A struggling firm was beset with cyber-attack issues before and after its closure, an administrators' report has revealed. Glaisyers LLP was established in Birmingham more than 150 years but had been insolvent for some time before entering administration earlier this month.

The subsequent statement of proposals prepared by insolvency firm Opus Restructuring gives a glimpse into the problems that brought about the closure, many of which will resonate with legal practices in a similar position.

Prior to administration, the firm operated a property department which was subject to a cyber-attack. This increased claims on the firm’s professional indemnity insurance policy, causing premiums to jump. The insurance costs had also made it more difficult to sell the business as a solvent prospect.

With the business stripped back to largely legal aid work in childcare cases, weekly payments from the Legal Aid Agency were insufficient to meet outgoings. Cashflow was consistently stretched and the firm relied on an overdraft with Santander and a rolling facility with another lender. Both these funding arrangements were personally guaranteed by the firm’s owner, who estimated he had invested a total of £475,000.

Glaisyers, which employed 19 people, moved its premises twice in recent years to cut costs but despite a significant reduction in rent, this was insufficient to return the firm the profitability.

Even after going into administration, external issues negatively affected the business. The firm eventually agreed a pre-pack administration, with family and prison law cases sold to Cartwright King for £50,000.

But in a letter to all known creditors, Opus explained that four offers had initially been made by different potential buyers for the majority of the assets. One of the offers was withdrawn due to a solicitor advising the firm being uncomfortable about the risk of being seen as a successor practice for insurance purposes.

The best initial offer was made before the Legal Aid Agency suffered a cyber attack of its own, which resulted in uncertainty of recovery of contingency payments and no guarantees that the work in progress balance was accurate. The offer was withdrawn before contractual terms could be agreed, as was the second highest offer.

Administrators estimate that £268,000 is likely to be available to pay preferential creditors in full. The total deficiency for all creditors is expected to be more than £1.5m. Unsecured creditors are likely to get back 2p in every pound.

Administrators’ and legal costs prior to appointment come to £60,000.