CMS Cameron McKenna has become the latest firm to call upon its fixed-share partners to make a substantial contribution of capital in light of HM Revenue & Customs’ (HMRC) recent overhaul of the way partnerships are taxed.
Members of the junior partnership that fall into band one of the firm’s four-tiered remuneration structure have been asked to contribute around £35,000 to £50,000 each. With 90 partners in this bracket, this means a total capital investment of up to £4.5m.
A partner at the firm told Legal Business: ‘The firm doesn’t necessarily need the money – it’s not a call for borrowings or to meet debt requirements. It’s a call to even out the capital positions across the various levels of the partnership. People were not necessarily happy taking on more borrowings but it hasn’t caused any ructions across the junior partnership.’
Last May saw the CMS Cameron McKenna reform its partnership remuneration model in an attempt to enable salaried partners to become a full equity partner more quickly while simultaneously increasing management scrutiny of performance. The system has new partners holding a fixed-share of the equity for at least four years before moving on to full-equity status.
In January the firm’s UK LLP accounts showed a 6.6% revenue drop for the 2012/13 financial year, alongside a 12.5% slide in operating profit. Profit for the financial year available for discretionary division among members of the firm also fell 4% from £39.4m to £37.8m in the same period.
Camerons’ capital call is in line with similar moves made in recent weeks by LB100 firms to meet their obligations under the rule changes. Earlier this month, Hogan Lovells announced that around 65 non-equity members would be required to make a capital contribution of around £60,000 to £100,000 each, with capital investment totalling between £3.9m and £6.5m – a move that will save the firm having to pay more in tax in respect of national insurance.