Unsecured creditors owed money by a failed Bristol firm stand to lose millions after being offered a fraction of the outstanding debts. An administrator’s report filed this month with Companies House reveals that Burroughs Day was forced to fold earlier this year after the level of borrowing outstripped trading figures.
The practice, which employed 79 people, was bought through a pre-pack administration in January – a month after insolvency experts had been introduced to the partners. All but two of the staff agreed to transfer to neighbouring firm Metcalfes Solicitors, which has since become part of the expanding Gordon Dadds Group.
But while jobs were preserved, unsecured creditors with claims of around £2.3m in total stand to recover just 2.9p in the pound from the remnants of the business.
The list of creditors includes former and current partners, who are owed almost £750,000. HM Revenue and Customs is owed more than £164,000, with trade creditors likely to be out of pocket to the tune of £310,000.
Administrator Quantuma LLP advised Burroughs Day partners at the start of this year that it was not possible to continue to trade, as the Solicitors Regulation Authority would be likely to intervene out of concerns about the management of client monies.
It is understood the option of buying the business was circulated to 77 firms. Three offers were made, of which just one – the Metcalfes proposal – included an offer for a freehold property in Portishead.
The firm can recoup £230,000 through property sales and around £540,000 from unbilled disbursements and work in progress. The administrator’s report reveals that Metcalfes agreed to pay 30p in the pound for all work in progress acquired as part of the purchase. Administration and legal costs from the winding-down are expected to come to almost £300,000.
The published accounts show a business that turned over £4.25m in 2016/17 but made profits of just £189,000. For the six months to 31 October 2017, the firm lost £16,000 on a turnover of £2m.
Burroughs Day had been one of the key drivers in the QualitySolicitors network before announcing last May that it wanted to cut ties, to ‘build on its own long-established, excellent reputation in the West Country’.
At the time of administration, Quantuma’s Andrew Hosking said that despite being a strong mixed-practice firm with a long history, a combination of declining turnover and a rising cost base had eroded profitability so that the business was not viable without ‘significant’ additional working capital.