BDO has applied to be appointed as liquidator of defunct law firm Halliwells, with the organisation, currently Halliwells' administrator, taking the first steps towards liquidating the failed firm's limited liability partnership (LLP).

BDO expects a decision on its application in the New Year but CMS Cameron McKenna issued a letter on behalf of the company last month stating BDO's intention to terminate its appointment as administrator and to instead become the failed firm's liquidator.

The letter, dated 15 November and sent to the four remaining members of the defunct firm's limited liability partnership (LLP) still registered at Companies House, does not give a date for when the liquidation will take place.

BDO's term overseeing the administration of Halliwells is due to end on 19 January 2012, after the professional services firm was granted a six month extension to its term in July 2011.

If appointed as liquidator by secured creditor The Royal Bank of Scotland, BDO will gain access to a wider range of powers, most notably under sections 213 and 214 of the Insolvency Act 1986 – fraudulent trading and wrongful trading.

Under section 214A, for example, former partners could potentially be liable to repay any drawings paid out from the LLP in the two years before Halliwells went into administration.

Freshfields Bruckhaus Deringer restructuring and insolvency partner Richard Tett commented: "After administration, liquidation is the natural next step in the winding up of a defunct business. However, it does also open up a number of additional potential remedies for liquidators to be able to seek financial restitution on behalf of the creditors."

Partnership law specialist Roderick I'Anson Banks added: "It looks to me as though we may be about to enter into a more hostile phase where things begin to get interesting in terms of claims by the liquidators against partners and former partners. We may see some cutting-edge litigation as a result."

The news comes after a group of ex-Halliwells partners were issued with letters by former fixed-share members in October, threatening legal action on the grounds of misrepresentation.

The letter, which was sent by Irwin Mitchell on behalf of 14 former Halliwells fixed-share partners, levels a number of complaints at the equity partners who each received a share of the defunct firm's controversial £24.5m ''reverse premium' property payout.

Halliwells went into administration in summer 2010, owing secured creditor Royal Bank of Scotland around £17.7m at the time of its collapse. A progress report in July this year revealed BDO had received claims from unsecured creditors worth £191.5m.

BDO said in a statement: "At a court hearing on Thursday 1st December 2011, BDO Administrators applied for a petition to be issued to put Halliwells into Compulsory Liquidation. The petition will be heard on 12 January 2012."