Cold calling ban hit claims firm
A ban on cold calling by firms handling personal injury claims contributed to the collapse of a Manchester business and with it the loss of 50 jobs.
The Legal Advice Bureau (LAB) went into administration last month after the Ministry of Justice decided claims firms could not generate business by cold-calling potential clients.
However, directors Ged Finneran and Michael McGrath bought the business and some assets from administrators in a pre-pack deal using a company called Claimfree.co.uk. The deal saved 30 of LAB's 80 staff and generated "significant value" for creditors, according to administrator Dean Watson of accountancy firm Begbies Traynor.
LAB made money by generating leads for law firms that would then pursue personal injury claims, but Mr Watson said the ministry's ruling led to a significant decrease in the firm's income at a time when it was being pursued by HM Revenue & Customs for unpaid tax.
He added: "The business was really affected by this decision so they had to make redundancies but they were still coming under pressure from HMRC. The directors sought insolvency advice, otherwise it would have been wound up."