Business of Law Firms
Ince applies for administration​

By Jake Rickman​

What do you need to know this week?

Welcome to this week’s Business of Law Firm series. We are back after a two week break to look at the sombre case of Ince Gordan Dadds.

After a series of pitfalls and misfortunes, The Lawyer announced last Wednesday that Ince (which was publicly traded) has applied to the court for an administration order, which is one of a few insolvency procedures available for a business that is unable to satisfy its financial obligations.

RollOnFriday provides a succinct summary of the woes Ince has faced over the years, which includes severe deterioration in revenue growth, reorganisations, and, most recently, corporate governance failures related to its accounting disclosure obligations.

As the article notes, Ince’s shares were suspended from the public market on 3 January 2023 after it failed to produce its accounts for 2022 (as is its obligation as a publicly traded company). After requesting a series of extensions to produce its accounts, on Wednesday Ince began the administration process after it emerged that its creditors had refused to support the business any longer.

Why is this important for your interviews?

Any law firm faced with insolvency generates alarm across the legal sector for a number of reasons. These include the fact that nearly all insolvencies imply at the very least a high degree of leadership incompetence, which is anathema to the legal profession generally.

However, the fact that Ince was a publicly traded law firm raises additional lines of inquiry and speculation.

A separate article published by The Lawyer, entitled “Good riddance to law firm IPOs”, treats Ince’s business failure as a vindication of the viewpoint that law firms and external owners (i.e., public shareholders) “don’t mix”. This is a bold proclamation (albeit well-evidenced), suggesting that the profession has considerably hardened against the notion that publicly traded law firms have merit.

To understand the significance of this proclamation, it is worth considering the history of publicly traded law firms. Prior to the Legal Services Act 2007 (LSA 2007), the law largely prohibited law firms from being owned by anyone other than individuals authorised by the legal regulator — i.e., law firm equity partners. This effectively constrained law firms from operating through any business medium other than a general partnership or limited liability partnership (LLP).

However, the effect of the LSA 2007 meant that regulated legal services could be now provided by businesses that were not ultimately owned by law firm partners. One of the two key implications of this was that law firms could now be partially or wholly publicly owned. (The other implication being that larger professional services firms like EY or Deloitte could now provide their own legal services).

At first, the notion that a law firm could restructure itself as a company and offer shares to the public seemed like an enticing prospect: it meant that firms could access a vast and hitherto untapped market of public cash with which to grow in exchange for adhering to the strict regulations that apply to all public companies.

For several years, commentators opined that this would radically transform the legal sector. In fact, this effect of the LSA 2007 was for years a hot interview topic for applicants seeking to generate an answer to the question, “What challenges and opportunities currently face the legal profession.”

However, as The Lawyer article evidenced, the reality is that law firms that converted to public ownership did not live up to the initial expectation. None of the six largest law firms that have gone public since the LSA 2007 took effect have demonstrated significant YoY share growth increase. Likewise, by most accounts, these firms have underperformed compared to similarly sized law firms operating under the traditional partnership model.This is to say that Ince’s failure may very well put to bed the idea that law firms such as Mishcon de Reya should pursue IPOs.