The fragile nature of a law firm’s status has been brought into focus as it emerged that a previously profitable City practice was effectively brought down by the departure of two directors.
An administrator’s report for the central London firm Zhong Lun Law Firm Limited, prepared by insolvency specialist Quantuma, outlined how the sudden exits of the two fee earners in September 2024 was the turning point.
This moment led to a ‘drastic’ reduction of fee income: turnover dropped from more than £5.5m in 2023 to £3.2m in 2025, with operating profits of nearly £1m becoming a loss of around £215,000.
While steps were taken to rebuild the income of the practice, claims were then made on the firm’s professional indemnity insurance in connection with new build real estate property transactions, in which Zhong Lun acted for investor clients. The firm could not renew its compulsory insurance at the end of 2025 and ceased trading, with all live client matters transferred with their consent by 29 December.
Zhong Lun Law Firm Limited had been established in London in May 2011 as a subsidiary of its parent company in China, providing legal services principally to the Chinese market in the UK. The joint administrators approached 10 different firms about acquiring all or part of the company, but no purchaser could be found.
A small number of support staff were retained as contractors to help with the wind-down of the business, with all files preserved and securely ringfenced.
The administrators reported that, at the time of their appointment, the firm had almost £500,000 cash reserves. As of March 2025, it had debtors of around £1.9m, but it is uncertain what if anything will be realised from any work in progress.
The administration is expected to cost £564,000, including around £190,000 in solicitor managers’ fees.
None of the creditors has received anything so far and future dividends are still uncertain. The report states that around £805,000 is owed to unsecured creditors, including £225,000 to employees.
