Two law firm directors have admitted professional misconduct in how they ran their firm – just three months after the business went into administration.
Documents filed with Companies House confirm that Staffordshire firm Frisby Solicitors Limited entered administration in July, owing around £1.35m to creditors.
It has now emerged that two solicitors at the head of the firm, Kevin Downes and Andrew Broome, admitted charges last month before the Solicitors Disciplinary Tribunal in relation to how they managed the business.
The pair admitted to causing or allowing the retention in the firm’s office bank account of monies received in respect of unpaid disbursements. They also failed to remedy promptly breaches of accounts rules and failed to run the firm effectively and in accordance with proper governance and sound financial and risk management principles.
The Solicitors Regulation Authority has confirmed that Broome was fined £20,000 and Downes suspended for 12 months. A third individual at the firm, Judith Read, has had conditions placed on her working in the legal profession, while two others from the firm were found to have no case to answer. The full reasoning behind the sanctions is likely to be published next month.
The practice was a long-established firm of solicitors which specialised in crime, confiscation, regulatory and Health and Safety Executive work.
A notice of administrator’s proposals, prepared by Stoke insolvency firm Currie Young Limited, states that the firm was introduced to Svenska Handelsbanken in 2011, with the bank providing an overdraft secured by a debenture and personal guarantees from the directors.
The business made several changes to ownership and imposed new financial controls in a bid to reduce its outgoings.
Despite securing a major investment from a third party, the firm frequently exceeded its limit on its overdraft facility with the bank, and it eventually brought in administrators this year.
The firm’s biggest asset is the book debts due, largely from the HSE and Legal Aid Agency, with a large portion of cases yet to have final bills prepared. A small number of former Frisby employees have been retained to handle this work, which is expected to realise £400,000.
Administrators say that preferential creditors will be paid in full and the floating charge creditor shall also receive a distribution. The unsecured creditors’ fund is expected to be just £31,581 – a fraction of the estimated £1.18m owed to them.