Ashurst is to get rid of its quarterly profit distributions in favour of a single yearly profit payment, in a move subject to a partnership vote.
Ashurst’s monthly drawings will continue but the payments, which are already considered high within the market, will rise by approximately 5%. Partners are expected to vote next month on the changes and 50% of the partnership must agree to the change.
If the vote is approved by the partnership, partners will receive remaining distributions that are due next May. In order to make the payments, Ashurst expects a £1m net increase in capital will be made by the partnership.
A spokesperson at the firm said: ‘we are planning to introduce a new distributions policy at the beginning of the next financial year that will see us paying a single annual distribution within 12 months of financial year-end. Partners will receive the remaining distributions that are due this year, relating to 2015/16 in May 2017. This completes the process of harmonising partner payment arrangements that we discussed at the time of merger.’
Ashurst will adopt a hybrid model of its own legacy payment system and legacy Blake Dawson’s, which historically paid out its partners on a yearly basis.
The proposed changes come after the firm halted quarterly distributions in August following disappointing 2015/16 financial results, which saw profit per equity partner drop by 19%. The firm is to restart its distributions this month.
As yet it is unknown whether the full share of profits will be paid out to partners or whether they will just receive a portion, as Ashurst has historically paid out less than partners are owed each quarter if it has insufficient funds to pay all partners.
Earlier this year Ashurst partners voted through fundamental changes to its remuneration system in a bid to retain star partners, including stretching its lockstep and allocating equity share to salaried partners.
Changes included adding an extra 10 points to the top of the equity ladder, which currently starts at 25 points. The top of the ladder will now plateau at 75 points, while the bottom of the ladder will remain unchanged. A performance-based bonus pool for both equity and non-equity partners will also be brought in.
Salaried partners will receive part of their remuneration as a full equity share, although it is not clear what the ratio will be. The changes come as part of a strategy by the firm to drive high performance and collaboration.