Firms should consider alternatives to traditional funding sources

first_img Damien Welch is director of SHF Legal Funding Ltd Business analysts report that poor management is a principal reason for business failure, while managing cashflow is critical and one of the most frequent stumbling blocks. One of the major challenges the legal sector faces, with which all practitioners will be overwhelmingly familiar, is that often, despite cases being concluded and settled, on many occasions these fail to generate income for a significant period of time. Law firms are businesses and a successful business needs the cashflow to invest to drive forward. Historically, law firms have turned to banks and other traditional sources of funding to bridge the cash outflow/cash inflow gap. However, this facility comes at a cost and has many limitations. The lending decisions of banks are based primarily on the law firm’s covenant and the value of the individual partners’ personal assets within the firm. Banks do not always understand or recognise the value of work in progress as collateral and they will generally not issue law firms with loans based solely on the value of their pending case inventory. Compounding the frustration, the economic downturn has led to a number of major lenders either closing their doors or quietly reducing their willingness to extend existing facilities – further squeezing the availability of funding to the legal profession. A major hurdle for law firms is proving repayment timescales and, when considering working capital facilities, banks will look at a company’s expected cashflow. Owing to law firms business cycles, a delay of several months can often be experienced prior to fees being generated and/or received. It is therefore very difficult for banks, and indeed the law firms themselves, to put a definitive timescale on repayments. This leads to banks becoming extremely conservative in their lending and only providing modest facilities. With banks only willing to lend a limited amount and these loans frequently being tied into expensive insurance products, law firms are facing an increasingly difficult challenge. Bank loans are often inadequate sources to support firm’s objectives, meaning they need supplementing with other sources of capital. In practice, this often entails partners contributing their own personal finances and further shouldering the financial burden. A brief examination of the prevailing funding methods raises the question ‘why has the industry not moved with the times?’ Lawyers are certainly not unworldly, but they appear hesitant or simply too busy to look for alternative funding methods. A funding alternative is one option, but a quantum leap is needed. Having been involved in the legal industry and experienced the changing funding issues facing the legal sector, it was a pleasant surprise to be introduced to an innovative option that provides the majority of the anticipated costs within a short period of time, and does not involve a lengthy application process, scrutiny of the law firm’s accounting, financial and/or personal information. Furthermore, it does not compromise bank or existing finance facilities as it is essentially self-financing. So what is the solution? Costs in advance CIA schemes, designed to act as an additional and supplementary service to the other funding methods, are already being successfully implemented and utilised. Such CIA schemes enable the early realisation of solicitors’ costs and help avoid unnecessarily low settlement agreements being entered into in the interest of speeding up payment. When a bill is drawn up by costs draftsmen, a CIA provider will usually advance a large percentage of the value of the bill within 24 hours to the law firm. This allows solicitors to maintain a healthy financial position, rather than constantly playing ‘catch up’ with the potential axe of a personal guarantee hanging over them. While some funding providers currently offer forms of disbursement funding that allow for prepayments to be advanced, of key importance to many partners is that they also require the guarantee of their personal assets, wherein lies the crucial differentiating factor. SHF Legal Funding Ltd is a new firm that specialises in the provision of cash advances to firms of solicitors purely on the basis of the settled litigation claim for which the costs have been assessed by the costs draftsmen, and/or agreed by the judge/court but still remain outstanding. The ambition is to provide law firms with a new alternative funding model that will revolutionise litigation funding and bring an end to the era in which law firms are handicapped by poor cashflows, the need for security and personal guarantees, and their dependence on the traditional and increasingly scarce bank funding models. Andrew Thomas of Civil & Commercial Costs Lawyers, a provider of costs litigation services, told me: ‘These are uneasy times for the legal profession both in terms of the economic climate and proposed changes to regulations; the profession will need to be careful, both in terms of maximising their inter-parties costs recoveries and releasing cash. In my view, a schemes which offer solicitors the ability to release cash funds against unquantified costs orders, without the need for applications to the court or rigorous paperwork with lenders, will change the landscape of the legal funding industry.’ The demand resonating from the legal industry is clear; what is needed is a simple, quick and effective funding mechanism that enables law firms to seek new business without the handicap of chasing cashflow while negotiating over historic costs incurred. Will CIA schemes be the solution to law firms’ financial woes? Time will tell. last_img read more

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Fate of Quinn Insurance hangs in the balance

first_imgMore than 2,900 law firms and sole practitioners could be left without professional indemnity insurance (PII) on Monday when the Irish High Court decides the fate of Quinn Insurance, the Irish insurance company that was forced into administration last week. Quinn covers around 10% of the solicitors’ PII insurance market. The Irish Financial Regulator, which regulates Quinn Insurance, has petitioned the court to appoint a permanent administrator to Quinn Insurance. If the court accepts the Financial Regulator’s arguments, solicitors holding Quinn policies will almost certainly have to buy new policies with other insurers, or enter the assigned risks pool (ARP), within four weeks The Irish High Court placed Quinn Insurance in provisional administration on 30 March following a petition by the Financial Regulator. Administrator Grant Thornton is understood to be delivering a financial report on Quinn Insurance to the regulator today, which will be presented in court on Monday. The Solicitors Regulation Authority has advised firms with Quinn policies to sit tight pending the outcome of Monday’s hearing. It is understood that Grant Thornton has told the SRA that Quinn has sufficient financial reserves to pay claims on PII policies, but an SRA spokesman could not confirm this. Martin Ellis, head of the solicitors’ practice group at broker Prime Professions, which provides 1,900 sole practitioners with Quinn PII policies, said: ‘If a new policy has to be put in place, then insurers aren’t going to do it for nothing.’ However, he predicted that policies would be allowed to run until 30 September regardless of the outcome of Monday’s hearing. A spokeswoman for PYV, another major Quinn broker, said that PYV is advising clients in line with the guidance of the Financial Regulator and SRA. ‘As an independent broker, we are not tied to any one insurer,’ she said. An SRA spokesman said that Quinn policyholders could be given a time extension to find alternative policies if necessary. Grant Thornton and the Financial Regulator have been analysing financial guarantees, estimated to be worth €448m (£394m) altogether, set up by subsidiaries of Quinn Insurance. The guarantees are alleged to have been used inappropriately to set off debts from other companies that make up the Quinn group conglomerate. Quinn Insurance said last week that the guarantees were fully disclosed in the accounts of its 24 subsidiaries, but the Irish Independent claimed this week that the existence of the guarantees was disclosed in the published accounts of just one Quinn Insurance subsidiary, Quinn Logistics, with no indication of their value. Quinn said this week that the guarantees were contained in the filed accounts of eight Quinn Insurance subsidiaries, to which the Financial Regulator has full access, and that the guarantees are worth less than €448m. Solicitors’ rules state that law firms must find alternative cover or apply to enter the ARP within four weeks if an insurer has provisional administrators appointed. However, the SRA said that the concept of ‘provisional administration’ as determined by the Irish High Court in the Quinn case falls outside the definition in its rules. Meanwhile, SRA figures show that £33m worth of claims are currently filed against law firms in the ARP, the insurer of last resort for firms unable to obtain PII on the open market. Some £5.5m is due in premiums from ARP firms, but just £2m has been paid to date.last_img read more

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The Big Society, votes and the law

first_imgMaybe it’s the rain, maybe it’s the lack of cricket in the Test match, but I’m in a wretched mood today. But the government, at least, has given me something to get my teeth into with two law-related stories catching my eye. Let’s start with justice minister Jonathan Djanogly’s assessment of the rise in the number of magistrates resigning. Despite a jump of nearly 20% in the past seven months, JD says there is absolutely no reason to suggest the exodus is linked to impending courtroom closures. Personally, I’m not sure he’s looking hard enough. The 100-plus closures across England and Wales will mean magistrates – who, lest we forget, are volunteers – having to travel further to do their bit. There will be no provision made for this extra time and effort; indeed, there have been rumours that magistrates are seeing their expense allowance cut. Is this David Cameron’s grand vision of the Big Society? Take a group of people who already volunteer in their community and inconvenience them until they cannot take it any longer? If this is how the government treats those already participating in the BS, how can it possibly hope to tempt others to follow suit? The law has also been a topic of discussion when it comes to the impending ‘summer of discontent’ that could be brought about by a raft of proposed strikes. Six million people could potentially down tools in the coming months, including members of the PCS union and their brothers and sisters in Unite, Unison, the NUT and the RMT. The rebellious masses have been met by a wall of opposition as ministers line up to take potshots at people simply for insisting their terms and conditions of work are upheld. Francis Maude, the cabinet office minister, was at the front of Cameron’s army, rather sinisterly warning that legislation to reform strike law ‘had not been ruled out’. Maude seems like the kind of man who auditions for his local amateur dramatics company and always ends up as the panto villain. I can imagine him dressed as the evil stepmother, with blushed cheeks and false eyelashes, snarling as he orders around poor Cinderella (presumably he won’t let her go on strike). Ministers seem keen on this idea of enforcing a rule that union ballots must attract a 50% turnout to be valid. But the fundamental rule of democracy is that we act on the wishes of the majority. The government’s view seems to be that non-voters would opt against a strike – my suspicion is that most simply abstain from ballots because they trust enough people would vote for a strike they support. If the government wants more rigidly enforced ballots, it can have them, whether by email or by votes on the shopfloor. I can almost guarantee you’ll see an even greater percentage in favour of a walkout. The government is on very shaky ground when it starts to question the legitimacy of these union votes. Cameron sits in Downing Street after galvanizing his party to win just 36% of the vote in 2010. Now try explaining how legitimate his right to power is.last_img read more

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LSB gives go ahead for barristers to manage ABSs

first_imgThe Legal Services Board has approved the Bar Standards Board’s application for changes to the bar’s code of conduct to allow barristers to be managers or employees of alternative business structures.In April this year, the bar’s regulator took the decision that barristers should be permitted to work in the new practice models and be regulated by other approved regulators when Part 5 of the Legal Services Act comes into force.The BSB has not yet applied to become a licensing authority, so will not be able to regulate ABSs.Welcoming the LSB’s decision, BSB chair Lady Deech said: ‘This change will allow barristers to offer their services in different, innovative ways in response to changing client requirements.’She added: ‘We strongly believe that this move is in the public interest and will, most importantly, increase consumer choice and access to justice.’Barristers are currently permitted to practice as managers or employees of legal disciplinary practices and have ownership interests in them, subject to putting in place safeguards to manage any potential conflicts of interest arising from self-employed barristers having an ownership.There are no restrictions in the code of conduct on barristers having an ownership interest in ABSs, although the BSB is considering whether specific rules or guidance need to be developed to manage any resulting conflicts of interest.LSB chief executive Chris Kenny said: ‘We encourage the BSB to see how the regulatory arrangements work in practice before they decide whether additional rules and guidance are needed.‘Before making further alterations to its regulatory arrangements, the BSB would need to be satisfied that these are needed and do not duplicate existing conflict provisions in its code of conduct.’Kenny added: ‘The BSB would also need to consider any potential conflicts with other regulators, particularly the licensing authorities that will identify and address potential conflicts of interest as part of the licensing regime.’last_img read more

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Regulation of surveillance remains unsatisfactory

first_img Roger Smith is director of the law reform and human rights organisation Justice Power does not always corrupt but it certainly complicates. Office brings a curious restraint to ministers once so principled in opposition. They must look back fondly to once glad, confident mornings. Then, David Cameron could wail that ‘the Labour Party has given up on civil liberties’. How bright still shone the lamp of liberty even just after the election. The coalition government proceeded to promise legislation to ‘restore freedoms and civil liberties’. This grand pledge brought forth the Protection of Freedoms Bill which, as far as the provisions on surveillance are concerned, is not quite the brave new world that we were promised. It’s an improvement, but not much of one. You might have guessed that the current legislation governing surveillance – the Regulation of Investigatory Powers Act 2000 (RIPA) – was likely to prove problematic just from reading the act. It provides for scrutiny by no fewer than four bodies: the Interception of Communications Commissioner; the Intelligence Services Commissioner; the Investigatory Powers Tribunal; and the Chief Surveillance Commissioner, depending on the powers used and the bodies concerned. That looks, at best, inelegant and, at worst, confusing. Furthermore, the tribunal and the commissioners only act after the event, except the Chief Surveillance Commissioner in a very small proportion (less than 0.5%) of the most serious cases. It you are subject to surveillance it is likely to be signed off by the body snooping on you or by the secretary of state. As anyone who has watched the fabulous American TV series The Wire will know, other countries do it differently. A unifying thread in its story was the necessity for the police to obtain a judicial warrant to undertake a wiretap or concealed recording. Baltimore cops become adept at pushing their luck in obtaining evidence that will be admissible in court – up to, and including, effective blackmail of the judge. However, for all its faults, the police work within a judicially structured framework. In this country, all three of the RIPA commissioners are also judges (albeit two are retired) but they are, on the whole, not required to authorise surveillance in advance. Other countries also have the advantage of somewhat less opaque legislation – our own is very badly drafted. It emerged during the News of the World phone-hacking scandal that the Metropolitan Police Service operated a rather handy (for them) definition of interception of communications which excluded any voice messages accessed after the recipient had listened to them. What is more, it took the European Commission – and not any UK authorities – to object to BT’s link-up with American advertising group Phorm. The commission referred the UK to the European Court of Justice when no domestic action was taken after BT allegedly breached the privacy of 18,000 of its unsuspecting users to help Phorm focus its targeting efforts. The CPS had declined to prosecute, saying it could be reasonably be argued that any offending was the result of an honest mistake or genuine misunderstanding of the law. The Chief Surveillance Commissioner, no less, saw no difficulty under RIPA with the bugging of conversations between the current shadow minister of justice, Sadiq Khan, and a prisoner constituent, Babar Ahmad. The commissioner noted that such activity ‘does not give rise to interception as defined by the legislation’. The home secretary changed the guidance. It took the Divisional Court to change the rules to confirm the pretty obvious point that prison managers should not authorise the bugging of privileged conversations between solicitors and prisoner clients. That would be a breach of the provisions of article 8 of the European Convention on Human Rights, the right to private life. A recent Justice report – Eric Metcalfe’s Freedom from Suspicion: Surveillance Reform for a Digital Age – reveals the astonishing reach of surveillance through contemporary British society. No one knows the total number of CCTV cameras in operation, but it is between two and four million. I once counted 27 between St Paul’s Cathedral and the Law Society in Chancery Lane, less than a mile away. The Automatic Number Plate Recognition programme records the time, date and location of 15 million vehicles a day, storing this information for a minimum of five years. Around 500,000 requests for communications data are made annually – with around 3,000 to Google alone. Some 2,000 interception warrants and 400 requests for intrusive surveillance are granted in an average year. These include authority to bug around 40 hotel bedrooms. Merseyside Police already use unmanned drones as an ‘eye in the sky’ and the Met want a batch of them for the Olympics. One of the problems that bedevils UK legislation in this area – as so many – is short-termism. This manifests as a longstanding reluctance of politicians of all parties, once in office, to adopt a clear and principled policy: they just want to respond to the stimulus of the moment. A Conservative government passed the Interception of Communications Act 1985 only after the UK’s lack of legislative authority for phone-tapping was slammed by the European Court of Human Rights in Malone v UK. Labour brought forward RIPA, at least in part, as a response to the decision of Halford v UK where the European Court of Human Rights said the earlier system of scrutiny was so limited that it did not apply to tapping a private police phone system. The Protection of Freedoms Bill should have been a chance to refashion the system of scrutiny from the bottom up – or even the top down. Alas, the opportunity was not taken. The bill adds two more separate commissioners to an already overflowing pot – one for the retention and use of biometric material, and another for surveillance cameras. It retains the principle of regulation after the event and, in the main, has no truck with prior judicial approval other than for local authorities. If Labour would dare to take it – which it probably does not since it was the author of RIPA – this creates the space for a continuing call for more comprehensive reform. Whatever the politics, the regulation of surveillance will remain piecemeal and unsatisfactory even after this bright new bill. How murky it all gets when you are in power.last_img read more

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What a site!

first_imgSubscribe now for unlimited access Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletters Get your free guest access  SIGN UP TODAY To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGIN Subscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our communitylast_img read more

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CDM made simple

first_imgSubscribe now for unlimited access Get your free guest access  SIGN UP TODAY Subscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our community To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGIN Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletterslast_img read more

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The parent trap

first_imgStay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletters Get your free guest access  SIGN UP TODAY Subscribe now for unlimited access To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGIN Subscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our communitylast_img read more

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L’s grannies

first_imgSubscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our community To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGIN Subscribe now for unlimited access Get your free guest access  SIGN UP TODAY Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletterslast_img read more

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Listen, this is important

first_imgSubscribe to Building today and you will benefit from:Unlimited access to all stories including expert analysis and comment from industry leadersOur league tables, cost models and economics dataOur online archive of over 10,000 articlesBuilding magazine digital editionsBuilding magazine print editionsPrinted/digital supplementsSubscribe now for unlimited access.View our subscription options and join our community Subscribe now for unlimited access Get your free guest access  SIGN UP TODAY Stay at the forefront of thought leadership with news and analysis from award-winning journalists. Enjoy company features, CEO interviews, architectural reviews, technical project know-how and the latest innovations.Limited access to building.co.ukBreaking industry news as it happensBreaking, daily and weekly e-newsletters To continue enjoying Building.co.uk, sign up for free guest accessExisting subscriber? LOGINlast_img read more

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