After a drawn-out process, Addleshaw Goddard has voted through several changes to its partnership deed, including further restrictions on partner exits and changes to management terms.
Managing partner John Joyce (pictured) needed a 75% majority to see through a raft of reforms to change the firm’s decades-old partnership deed. While the majority was secured, the firm would not state how many partners approved the changes, which come into effect on 1 May 2017.
As part of the changes, the firm is moving toward an all equity partnership model. Currently 87 of the firm’s 189 partners are full equity partners.
Now there will be two categories of partners, with current full equity partners to be classed as category B partners. Fixed share partners will be known as category A partners.
Category A partners will be given more powers and rights, including participating in elections for Addleshaws’ remuneration committee, which reviews partner performance and pay.
The most contentious changes have been restrictions on partners leaving the firm. The original deed had a ‘bottleneck provision’, which meant no more than seven equity partners can leave without board consent in one financial year.
When the changes come into effect category A partners – those current fixed-share partners – will also be covered by exit restrictions. The ceiling on category B resignations will remain at seven a year, though there will also be a higher combined total in force across A and B.
While the total number of combined category A and category B partners that will be able to leave in one year is not clear, the reforms appear to have been somewhat watered down from earlier proposals, which had last year suggested current full equity partner resignations should be as low as three.
Joyce told Legal Business that the board can give consent to let partners leave and the limit has never been enforced.
Other changes include the introduction of ‘bad leaver’ provisions and restrictive covenants relating to fee-earners. The firm would not detail the covenants, but Joyce says they are ‘market standard and not aggressive’.
Finally, Addleshaws has also extended terms of office for senior partner and managing partner to four years from three.
A spokesperson said: ‘The consultation was well overdue and identified what was either fit for purpose or out of step with the Addleshaws of today and in need of modernisation.
‘The commercial bargain between the partners remains fundamentally unchanged and the new set of articles adopted by the partners via the vote which closed on Monday are now in place.’