Quantuma reappointed as administrator as questions emerge about KWM's accounting practices before collapse

Quantuma has secured a 12-month extension to its term overseeing the administration of King & Wood Mallesons’ failed European arm, as questions emerge about accounting practices in the run-up to the firm’s collapse a year ago.

Quantuma partners Andrew Hosking and Sean Bucknall are understood to have questions about some of the accounting practices at the firm during the 12-month period leading up to its collapse into administration, with concerns around areas including how work in progress was carried over.

Sources close to the matter told Legal Week that former senior managers at KWM are likely to face further questioning about decisions made in the run-up to the collapse.

KWM’s European arm filed for administration a year ago yesterday (January 17), meaning that Quantuma’s initial 365-day term needed to be extended as the process of winding down its affairs has not yet concluded.

Its term as administrator will now run until 17 January 2019.

The last progress report on the administration was in July, however it is understood that administrators are chasing several large debts on behalf of the business, worth up to £2.5m in total.

News of the extension comes as former KWM partners face further delays to their tax loss relief claims.

KWM changed the partnership deed for its European arm in December 2016, to ensure that any tax losses would be split fairly between current and former partners in the event of a collapse.

However, it is understood that Deloitte, which was appointed by Quantuma to complete the former SJ Berwin business’s cessation accounts, has yet to finalise total tax losses, and therefore the allocations owed to individual partners.

Terminal tax losses are normally allocated to current and former partners to offset as a deduction in calculating net income for the partnership’s final tax year and the three years preceding it.

KWM Europe’s collapse into administration in January 2017 was the biggest ever UK law firm failure.

At its height in 2007-08, the legacy SJ Berwin business was ranked 14th in the UK top 50 with revenues of £215m and profit per equity partner of £801,000.