Jobs saved as big legal aid provider collapses into administration

One of the country’s biggest legal aid providers has been bought as part of a pre-pack administration arranged this week.
Cartwright King, which operates from 11 offices across England, was placed into administration yesterday after several months of financial struggles.

Joint administrators from restructuring firm BDO LLP have completed the sale of the business and assets in a pre-pack deal to AWH Acquisition Corp. The firm will continue to trade under the Cartwright King name. All 80 employees will transfer and AWH will act as a successor practice, serving existing clients.

In a statement, BDO restructuring partner Mark Thornton said: ‘Unfortunately, difficult trading conditions alongside issues caused by Covid-19 and the continuing court backlogs resulted in cashflow issues for the firm from which it was unable to recover.

‘We are pleased to have secured the business and assets sale of Cartwright King, a business which provides a vital service to the public, ensuring continuity of legal cases for clients and the preservation of employment for all staff. This is also the best outcome for creditors in the circumstances.’

Financial statements for the year to 30 September 2021, published in October, show that Cartwright King was forced to write down almost £625,000 after it was decided to update the company’s accounting policy for work in progress to stop including matters that were more than three years old. This policy was adopted as it was felt that a ‘more rigid, consistent basis’ should be used for older potentially unrecoverable work in progress. As a result the 2020 accounts were restated to take account of the vanished revenue.

The business reported a pre-tax profit of just £73,000 for the year, on turnover of £9.66m. This was at least an improvement on the (restated) £1.4m loss recorded in 2020.

The firm had cash reserves of just £6,876 and net liabilities of more than £1m, with £4.66m owed within one year.

Chairman Michael Thurston said in October this year that the outlook remained ‘relatively positive’ and that Cartwright King had continuing legal aid contracts and could rely on a regular inflow of cases. The directors understood that the challenges were ‘considerable’ but Thurston said a change in management in May had begun the process and brought about a ‘greater concentration on cash generation and collection processes rather than reliance on work in progress’.