One of the largest regional insolvency firms in the country – The P&A Partnership – went under owing £11 million, reports reveal.
The Sheffield-based company went into administration owing money to 127 creditors, including £1.28million to the Royal Bank of Scotland and £983,000 to HMRC.
The crash sent shockwaves through the business community – P&A was one of the largest independent insolvency and debt collection firms in the country, acting for multinational PLCs, financial institutions, solicitors, accountants and business advisers across the UK and Europe.
It also had a reputation for handling high-profile cases including the administration of several football clubs.
But it hit trouble last year when the Department for Business, Innovation and Skills raided its premises on Queen Street, twice, and launched a criminal investigation.
In December Grant Thornton launched a £1.2m legal action over alleged unjustified fees after a Nottingham timber merchant went bust. The case has not yet gone to court.
A report by administrators BDO reveals P&A hit problems in June when its bankers, RBS, asked for a review of its cash position.
It showed a net deficit of £1.7m and further potential liabilities of £1.1m from the legal claim.
A BDO report shows P&A owed HMRC £983,000 - of which £543,000 was overdue. And on July 14 HMRC officers visited the premises and took ‘walking possession’ of office equipment worth about £10,000.
The report states P&A fees from work in progress stood at £1.89m but it was not possible to convert this into cash quickly and it was ‘unable to trade out of its financial position without an injection of funds’.
But RBS was unwilling to provide any more money on top of unsecured debt of £1.28m and BDO was asked to find investment or a buyer.
Two buyers were identified, but neither was interested in acquiring the shares of the company – in part because they would become liable for any payout from the Grant Thornton case.
The report adds: ‘Even if funding was available, the nature of the business meant it would almost inevitably have lost all credibility whilst in administration itself’.
In the end ‘certain business and assets’ - including 36 staff - were sold to insolvency firm Begbies Traynor, for £860,000 in a ‘pre-pack’ deal judged by BDO to be a better outcome for creditors than an immediate shut-down of the business.
P&A boss Jeremy Priestley was by far the largest creditor. He was owed £5.9m.
The report states: ‘The majority represented consideration for the sale of goodwill in the original partnership to the company in 2012. We understand that the sale had primarily been driven by tax considerations.’
A Begbies Traynor spokeswoman said: “We can confirm that Jeremy Priestley acts as a consultant to Begbies Traynor (SY) LLP following its acquisition of the trade and certain assets of P&A Partnership Ltd. Begbies Traynor did not acquire the case, or any liabilities relating to the case, which is subject to the Grant Thornton litigation. We understand the legal action is against two former partners of The P&A Partnership who did not join Begbies Traynor.
“As the Grant Thornton litigation and the BIS investigation are ongoing and as we are not party to them, it would be inappropriate for us to provide further comment.”