In October 2008 Legal Week carried a story about a property deal by Halliwells that generated a substantial pay-out for the firm's equity partners. It seemed an unusual little story, but scarcely one of dramatic interest. In hindsight it was probably the single event that most directly led the high-profile Manchester firm to last week file a notice of its intention to appoint an administrator, effectively signalling a sale of its assets.

Certainly, Halliwells has appeared beset by problems over the last two years, including partner departures, redundancies and pressures from its lenders. Yet, in many ways, it was the decision to distribute a £21m property windfall garnered from its move into flagship Manchester offices that sowed the seeds of what was to come.

The deal, which was well chronicled in a 2009 piece by Legal Business, saw the majority of the windfall distributed to the firm's equity partners, with disastrous consequences for the firm.

For one, it had no effective means of locking in the equity partners, many of whom have since left the firm. Worse, it was massively divisive within the partnership, with fixed-share partners feeling that money had been taken out of the business at their expense. With the firm thinly capitalised, partners at the end of 2008 were asked to put in at least £5m into the business.

There were other issues exacerbating the pressure on Halliwells, notably a troubled takeover of James Chapman and a struggling London office. The combined result was that the entrepreneurial firm went into the downturn already substantially weakened. A firm with little or no debt soon had to wrestle with bank borrowings in the region of £20m. If nothing else, the story of Halliwells provides a reminder about how a single judgement call can have huge consequences for a firm, even in an age in which governance and risk management standards have plainly improved.

Where this will all end is hard to say, as this is largely uncharted territory. It's so rare for major law firms to run into this kind of difficulty that the distressed sale of Turner Kenneth Brown in 1995 is the closest you can find to a comparable incident.

This means there are few established procedures for selling or winding up a major law firm. Certainly, the Solicitors Regulation Authority – which is primarily focused on what happens when small firms or sole practitioners get into trouble – isn't geared up to take a proactive stance in a situation like this.

And no one really knows how practical it is to put together a deal to transfer large practices in such circumstances. Meanwhile, partners are deeply worried about what will happen to their capital and around 800 staff will be fearing for their jobs.

Click here for an extended piece on Halliwells from Legal Business