Insurance boutique Hextalls is set to relaunch through a pre-pack administration in an unusual legal move, with restructuring specialist Begbies Traynor set to be appointed as the law firm's administrator.

Begbies is expected to be named as the limited liability partnership's (LLP) administrator within the next few days, following a court order.

Hextalls, which has lost a number of partners in recent months, including a liability team to Kennedys and the separate departure of chairman Matthew Clarke, has been facing cash flow difficulties and problems with historic debt.

However, the firm will continue to practise, with a number of partners agreeing a buyout through a pre-pack administration in an unusual move for the legal sector. Pre-pack administrations have rarely been used by law firms as they are only possible with LLPs.

Alex Padfield, a partner in Hextalls' insurance team who is expected to take on a management role within the new firm, told Legal Week: "The firm is in some difficulty in terms of cash flow. A few years ago we tried to diversify and extend into other areas – some of which have not been as successful as we would have liked.

"A decision has been made to refocus the firm on what it has always been good at – such as insurance and litigation. The pre-pack means we can carry on as a new company and the idea is to continue as Hextalls but with a new outlook."

LG corporate recovery and restructuring partner Steven Cottee is advising Begbies.

Commenting on the administration, one leading partnership expert said: "With an LLP you are able to just walk away, but this would mean saying goodbye to clients and the good parts of the business. It seems Hextalls is looking to get rid of the deadwood which made it unprofitable.

"It is to the benefit of the creditors to allow the business to continue in a form that makes it worthwhile. The partners setting up the new LLP will bring cash into the old LLP to pay back the creditors. There may even be some arrangements that profits from the new LLP are used in some part to repay creditors of the old LLP over time. By saving the profitable parts of the business, all stakeholders – staff, partners, clients and creditors – should benefit."

Full details of those staying with the firm and those leaving are still to be decided.