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Pre-Packs and insolvency law aren't the issue here. There are no special rules in insolvency regulation for solicitors practices. The main problem is that, unlike manufacturing business or property companies, the bulk of a law firm's assets disappear upon formal insolvency. Staff with a following are free to go elsewhere and the clients can require that the file follows them. Lien's are worth little in a negotiation as the administrator has no control over the lawyer doing the work.
The real problem is with the lending community who have still not sufficiently grasped (in spite of Halliwells, Cobbetts, Paribas, Slater and Gordon) that our WIP is not a realisable asset on insolvency. Prior to 2008 banks tended to be staffed by under pressure relationship managers. They were pressured to hit targets to deliver fantastic deals figures to boost the share price of the Bank. The Board of the Banks were rewarded on the increase in their share price for their 3 year fixed term contract. Those Chief Execs and directors moved on to the next PLC with the pats on the back leaving behind a castle built on sand.
That's a long winded way of saying that the losses to law firm's creditors can generally be avoided (apart from those suffered by the involuntary debtors - HMRC ) by those creditors operating better due diligence and risk management procedures.
If you push easy credit with no strings attached - no risk of personal loss - then don't be surprised if people take it with little thought as to how or whether it will be repaid. Lawyers are no different than consumers and other businesses in this regard.
Look at the proliferation in pay day lenders and IVA practices in recent years. Where do you think that demand came from ? What about the losses suffered by the creditors in those arenas. Let's not be too quick to turn on each other. Yes, there is greed in the legal profession but don't lets confuse the issues and the causes.
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