Mishcon de Reya is set to bring all partners into the equity and convert to a limited liability partnership at the end of autumn in 2015, following a vote made by the firm around eight months ago.
Mishcon’s proposed new model will constitute a marked shift from the firm’s current structure which consists of legal directors, junior partners (or fixed share partners) and senior (equity) partners.
The transformation will see every partner become a form of an equity partner. Current equity partners will become ‘senior equity partners’ while junior partners will become ‘junior equity partners’.
Following the conversion, the partners will contribute capital although it has yet to be agreed how much. It is likely that a band system will be put in place depending on the seniority of the junior equity partner.
Having registered as an LLP in 2008, which has remained dormant, the firm currently has 65 fixed-share partners and 37 equity partners. By removing fixed-share partners, it will bring the firm in line with HMRC rules on partnership taxation. New regulations that took effect in April mean partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’ and treated as employees by tax authorities in a move expected to add thousands of pounds onto firms’ tax bills.
Managing partner Kevin Gold tells Legal Business: ‘The firm has already voted in principal to move to an LLP but we’re not ready to convert yet. We expect the conversion to happen before the end of the autumn next year. The new HMRC rules has allowed us to look at this.’
Having this year enjoyed PEP growth of 16% to £975,000 from £840,000, the firm’s impressive profit per equity partner figure is likely to be affected when all partners are brought into the equity.
Other changes in the firm also included applying for an alternative business structure licence last month, a move that was prompted by bringing up to four key employees into the partnership who are currently part of the board or senior management team. This includes chief operating officer Bambos Georgiou, business development director Elliot Moss and head of human resources Vanessa Dewhurst.
‘They are all regarded as senior partners anyway,’ says Gold. ‘Now the possibility exists for them to join the partnership we intend to invite them to join.’
The news follows the firm’s plans to move to Africa House in Kingsway, a 120,000 sq ft property that will cost an estimated £3m more per year than the firm’s current four offices spread across Holborn.