Ashurst has halted its upcoming quarterly profit distribution to partners (PEP) following disappointing financial results which saw profits per equity partner drop by 19%. The payment was scheduled for this month (August).
Former partners told Legal Business the firm had also failed to pay out its February quarterly partner drawings this year. It is understood a hefty tax bill in January contributed to the firm’s inability to pay. A management memo sent round the partnership in the last week said the firm is well ahead of budget and on target for the next financial year, but quarterly distributions would be held back.
Ashurst has historically paid out less than what partners are owed each quarter if it doesn’t have sufficient funds to pay all partners and will miss quarterly drawings if it lacks profit.
A spokesperson said: ‘We have always had a conservative and prudent approach to cash management. Our policy is not to borrow to pay out profit to partners.’
Ashurst posted its second year of falling revenues following its merger with Blake Dawson in 2013 with turnover falling 10% to £505m while PEP took a significant hit, dropping 19%, down to £603,000 from £747,000 during the 2015/16 financial year. Following the disappointing performance, the firm voted through changes to revamp its lockstep in a bid to retain star partners earlier this month.
The firm has been hit by a string of exits across the past year. Most recently restructuring partner Diane Roberts left for Reed Smith in July, with restructuring partner Simon Baskerville leaving for Latham & Watkins the same month. Baskerville followed the firm’s head of financial services regulation Rob Moulton who left Ashurst in June for to the US firm. Management is also not immune from the exits, with the firm’s chief financial officer Brian Dunlop also leaving in July.
The move follows King & Wood Mallesons also failing to pay profit distributions last month, despite moving from a quarterly to a monthly-based system and after the partnership agreed to stump up £14m following a cash call.