Collapsed legal firm Tods Murray had over £5m in debts when it went into administration in October, according to a report on the practice.
A report by joint administrators Tom MacLennan and Iain Fraser of FRP Advisory reveals that the firm got into difficulties due to its high overheads, in particular for its offices at Edinburgh Quay, where it moved in 2004, and which "substantially increased" its costs, the report states.
Debts relating to its offices accounted for £3.47m out of an estimated £5.14m unsecured debts, in addition to £2m owed to Bank of Scotland which held a floating charge over the assets. Unsecured creditors are unlikely to see any of their money.
Turnover also fell from a high of £23.4m in 2006 and in the year to 31 March 2014 was £12.4, leading to a profit and cash flow crisis given the overheads relating to people and property.
“The cash position of the firm was further worsened by the requirement to pay capital to retiring partners whilst being unable to generate new capital from incoming partners due to lack of finance”, the report notes.
It adds that it was not possible to rescue the firm as a going concern as no purchaser could be found for the business and it was not permitted for a legal practice to trade in administration.
Tods Murray's work in progress was acquired for £595,000 by Shepherd & Wedderburn, which also took on many of the 140 staff.