Insolvency practitioners at KPMG have been lined up as the potential administrators of law firm Cobbetts, the owner of Leeds-based debt recovery specialist Incasso.
Cobbetts confirmed earlier this week that it is set to enter administration due to “the difficult trading conditions in the professional services sector.”
In a statement the Manchester-based company, which has nearly 500 staff, said it has reluctantly concluded that the appropriate course at this time is for the firm to “obtain the protection of an interim statutory moratorium.”
The company’s board believes that this process will enable a sale of the business and assets of the firm to be concluded in a short time frame.
The statement added: “We are also working closely with our regulator, the Solicitors’ Regulation Authority (SRA), with all stakeholders and our professional advisers to achieve the best outcome for creditors, clients, employees and members.
“We remain confident that we will be able to provide a further positive update in the very near future.”
Incasso LLP, based in Leeds, is the specialist debt recovery and credit management division of Cobbetts. According to accounts filed on Companies House, Incasso is 100% owned by Cobbetts.
No accounts including financials for Incasso have been filed since January last year, when they were published for the year to April 2011.
But Cobbetts stated in December last year that turnover for the whole company had reached £20m for the second half of 2012, in line with the previous 12 months. The company has a debenture securing its main lender Lloyds TSB against all outstanding debts.
The SRA said it has been engaging with Cobbetts for some time, to maximise protection of clients while the firm tries to resolve its financial problems.
The regulator will also provide guidance to help achieve an orderly wind down of Cobbetts and transfer of client business when it occurs.
Samantha Barrass, executive director of the SRA, said: “The central focus for our work with Cobbetts has been and remains the protection of client interests, including client money, competent continuance of client business, effective client communication and resolution of any confidentiality and conflict of interest issues which may arise.
“The primary responsibility for the protection of clients’ interests remains the firm’s and, as relevant, the other key parties involved, but we have powers to intervene directly if clients’ interests cannot be protected.”
She added: “The best solution for clients though is an orderly wind down, which we hope will be delivered in this case. We will be overseeing progress very closely in the coming days and weeks.”
There are around 74 partners, 156 solicitors and about 36 trainees now at Cobbetts.
The notice of its intention to appoint administrators has raised concerns over what will happen to the trainees, although this is an area in which The Law Society provides support.
A spokesperson for the Law Society said: “We will work with the profession to support trainees displaced as a result of any firm’s financial problems in finding new training contracts.
“The response from the profession to similar circumstances in the past has been very positive.”
Talks over a potential merger between DWF and Cobbetts were abandoned in 2012, a failure that both companies attributed to uncertain market conditions, but now DWF has been touted as a potential buyer of the whole Cobbetts entity or some of its assets.
Cobbetts was originally established in the 1800s in Manchester.