Legal Business

Capital call on salaried partners at Weightmans and Addleshaws in response to impending LLP tax overhaul

Capital call on salaried partners at Weightmans and Addleshaws in response to impending LLP tax overhaul

The tally of City firms calling on salaried partners to increase their capital investment in response to new HM Revenue & Customs (HMRC) rules is growing as Weightmans and Addleshaw Goddard this week confirmed they are in the process of significantly raising contribution levels.

Partners at Addleshaws voted in favour last Thursday (20 March) of 60 fixed share partners (FSPs) making a cash investment of just over 25% of their salary, the minimum stipulated by HMRC in order to be considered a partner as opposed to an employee.

The firm called for investment of a few percentage points above the minimum to allow room for error, with the definition felt to be unclear, according to head of employment Michael Leftley, who led the top 25 firm’s response to the new legislation.

Meanwhile, at LB100 top 50 firm Weightmans, following a consultation with partners into how the firm should meet the new taxation rules, almost all the FSPs chose to put more capital into the firm with each FSP contributing on average around £30,000 to the firm, totalling £3.8m.

The amount collected – which will be invested in the firm’s development according to managing partner John Schorah – varied among partners depending on their seniority, with those who chose not to add to the pot regarded as employees under the new rules.

In response to the overhaul, which was confirmed in Chancellor George Osborne’s budget as going ahead as planned in April 2014, despite protests from the industry, firms including Herbert Smith Freehills, Ashurst, TLT, DWF and Trowers & Hamlins have all confirmed to Legal Business that they are reviewing their partner remuneration arrangements.

The new rules will 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.

Of the firms that have announced substantive changes so far, TLT has requested that each of its 60 fixed-share partners contribute £20,000, a move that will boost its funds by a minimum of £1.2m. ‘We will put in place external funding for fixed-share partners if needed, to support any capital contribution,’ a spokesperson for the firm said.

francesca.fanshawe@legalease.co.uk

Legal Business

Addleshaws begins management elections as Devitt stands down early

Addleshaws begins management elections as Devitt stands down early

Addleshaw Goddard has started the week with news that managing partner Paul Devitt is to step down early, while partners are up in arms over miscalculated partner profit points and it has resigned itself to losing out on recovering a signifcant success fee.

The top 25 LB100 firm confirmed this morning (17 March) that Devitt is to stand down a year before his tenure is due to end on 30 April 2015, kick-starting an election process to ‘coincide with the next iteration’ of the firm’s strategy.

Devitt has informed the firm’s board that he will not stand for re-election. He was re-elected managing partner for a second three-year term in May 2012, following an uncontested election.

According to a firm statement: ‘bringing forward the election process to coincide with the next iteration of our strategy allows for a constructive discussion about the next phase of the firm’s strategy, helps to build momentum entering that phase, avoids a drawn out hustings, and provides certainty over our managing partner for the next three years, from the beginning of the coming financial year.’

The firm added: ‘[Devitt] has made an outstanding contribution to our firm and been enormously influential in helping us to build the strong and growing business we enjoy today. We understand and respect Paul’s decision not to stand for re-election and look forward to the continued and valuable contribution he will make to our business as a partner in the corporate division.’

Nominations have not yet been invited from the partnership, and the firm has refused to comment further until the election process is completed. The firm has previously refused to comment on claims by former lawyers that real estate head Adrian Collins and business support and restructuring head John Joyce have put themselves forward for the role.

It has been a difficult period for Addleshaws performance-wise in recent years, with the firm posting a 15% fall in revenue between 2008 and 2013, while its latest limited liability partnership results revealed that its bank borrowing increased by £4m as 2012/13 audited revenue at the firm fell 2.4% from £168m to £164m.

This situation has not been helped by a recent miscalculation of partner points. The firm has confirmed it reviewed the administration of its partner remuneration system following an error in calculations at the start of the current financial year, which related to the number of points by reference to which profit is distributed to partners, which will result in a slightly lower than forecast end-of-year pounds per point.

The firm said: ‘The miscalculation of total number of points awarded does not in any way affect the overall profitability or financial stability of our business which remains healthy and financially stable and sound.’

‘We have reviewed and introduced improvements in how we administer the pointage system to ensure it cannot happen again.’

Also this week, it has emerged that the firm has decided to write off a large success fee on the basis that it would be extremely difficult to collect. That fee is understood to relate to litigation brought by the late Russian oligarch Boris Berezovsky.

sarah.downey@legalease.co.uk

Legal Business

Wragges announces post-merger management line-up but Addleshaws faces scrutiny over leadership team

Wragges announces post-merger management line-up but Addleshaws faces scrutiny over leadership team

For Addleshaw Goddard the timing could have been more flattering. On the day that national rival Wragge & Co confirmed a new look management line-up in anticipation of its tie-up with Lawrence Graham (LG) in May, uncomfortable attention has been focused on the leadership of national rival Addleshaws.

In the wake of Wragges’ announcement in December that its £171m merger will go ahead, with Wragge Lawrence Graham expected to edge ahead of Addleshaws in the LB100 top 25 for the first time, the firm today (17 February) confirmed that its five core practice group heads have now been decided, all who will sit on the management board, with four of the appointments coming from Wragges and one from LG.

Wragges; current head of residential development Richard Bate will head real estate in the merged firm, and current dispute resolution head Davinia Gransbury will retain her role.

Wragges’ pensions partner Jason Coates will lead the new combined and renamed human resources team, while current group leader for corporate, commercial, finance and projects Michael Luckman will head the new abridged commercial and projects group.

LG managing partner Hugh Maule will assume the role of group head of corporate, finance and private capital.

All five practice heads will sit on the board alongside Wragges’ managing partner elect David Fennell (whose title will change to chief executive of the combined firm); current Wragges senior partner Quentin Poole, who will stay in that role, and LG senior partner Andrew Witts, who will become chairman.

Two non-executive directors complete the new board line-up, with former president and chief operating officer for global businesses at Thomson Reuters, Helen Owers appointed alongside KPMG’s Alastair McLeish, who most recently held the role of UK head of tax and pensions and head of KPMG ELLP’s tax practice.

The board will run a firm of 1,300 staff including 770 lawyers, operating out of 10 offices, after a majority vote of more than 75% from both partnerships secured the deal.

In comparison, Addleshaws’ current prospects look more mixed. While Wragges and Addleshaws often been compared to each other as arguably the two most high quality institutional firms bred in the UK regions, Addleshaws has struggled for growth since the boom.

On current trends, WLG looks set to this year push past its old rival in revenue terms.

Addleshaws saw its revenue drop by 15% between 2008 and 2013, one of the worst performances in the LB 100, and Addleshaws looks set to face another a contested election when current managing partner Paul Devitt’s second term comes to an end in April 2015.

While the firm refused to comment on claims by former lawyers that real estate head Adrian Collins and business support and restructuring head John Joyce have put themselves forward for the managing partner role, the firm is set to see an election this autumn. This comes amid a period in which there have been questions asked over the firm’s progress.

Addleshaws latest limited liability partnership results filed by the firm revealed that its bank borrowing increased by £4m as 2012/13 audited revenue at the firm fell 2.4% from £168m to £164m.

francesca.fanshawe@legalease.co.uk

Legal Business

Panel review: Addleshaws and Linklaters new appointments as Nationwide completes adviser reshuffle

Panel review: Addleshaws and Linklaters new appointments as Nationwide completes adviser reshuffle

Addleshaw Goddard and Linklaters will sit alongside incumbent advisers Allen & Overy and Eversheds on Nationwide‘s new legal panel as the building society today (31 January) concluded its first review since putting together its first-ever roster in 2009.

Burges Salmon, Nabarro and Olswang have all lost their place on the group-wide legal panel for the building society, which started its review process last summer, led by group general counsel Liz Kelly, after plans to start the review in early 2013 were delayed.

In a statement, the building society said: ‘Nationwide…has consolidated the work undertaken by its core panel so that the panel is able to provide full support across the range of legal and compliance services required by the Society going forward. Crucially, these firms will forge close relationships with Nationwide, becoming an extension of the in-house function and partnering business success.

‘The review follows a strategy of ensuring the panel suitably reflects the nature of the work being undertaken by the business now and in the future.’

GC Kelly, who is due to leave Nationwide at the end of the financial year to spend more time with her family, said: ‘Following a rigorous tender process, we have really challenged firms to showcase their ability to deal with a wide range of issues.

‘We have selected those firms which demonstrated that they were not only able to respond to the work and challenges we face as an organisation, but additionally offered the best value to our members and were a natural fit to Nationwide’s culture and business.

‘We would like to thank our outgoing panel members for their valued experience, particularly during such an exciting, and challenging time, for Nationwide.’

Kelly was appointed as general counsel in 2009 and has since pulled together what was a fractured legal department, creating a risk-based blueprint for areas where it needed to grow and building it up to around 50 lawyers, including seven litigators.

Her innovations include rolling resource planning, under which the legal team provides a formal two-year partnering plan to show how it will support the business based on discussions with key stakeholders.

The forward-thinking lawyer also introduced terms of reference for each project, which sets out at the outset the agreed project objectives.

The building society was one of five financial institutions identified in June by the Prudential Regulation Authority as having a capital shortfall. Kelly said: ‘What we are looking for in our panel review is how firms can support us on the regulatory side.’

Kelly says she will also play a role in the ongoing process of appointing her successor.

Francesca.fanshawe@legalease.co.uk

Legal Business

LLP latest: Penningtons and Addleshaws both see highest-paid member drawings fall during last financial year

LLP latest: Penningtons and Addleshaws both see highest-paid member drawings fall during last financial year

Penningtons Manches is the latest top-100 UK firm to file its limited liability partnership (LLP) accounts for 2012/13, which in keeping with a host of leading City firms, reveal that its highest paid member took more than a £52,000 cut, taking home £286,642 compared with £338,759 in 2012.

The firm posted a turnover figure of £32.1m, down very slightly from £32.3m in 2012, with the firm’s profits more or less flat at £11.53m compared to £11.50m.

Long-term loans at the firm, which acquired Manches from administrators PwC in October 2013, increased from £3.7m to £7.7m.

Penningtons employed a total of 283 members of staff in 2013, up from 260 the year before, of which administrative staff grew by 14 heads and client service staff increased by nine.

Elsewhere, Addleshaw Goddard’s LLP filing has revealed that the firm’s highest-paid partner took home £583,173 compared to £592,789 the year before.

Staff headcount at the firm is down to 978 this year from 1,016 last year, with its fee-earner and support staff count down by 23 and 15 heads respectively. As a result, salary costs reduced from £48.2m to £46.9m and social security costs were also down by around £1m. However, a rise in pension costs led to an overall increase in staff costs from £54.7m to £55.2m.

Nonetheless the firm reported no change in its average of 152 partners for the financial year ending 30 April 2013.

The firm posted a dip in turnover from £167.5m to £164.4m in 2013. Operating profit at the firm was also down from £57.7m to £54.3m, while partner profits fell from £55.5m to £52m.

The firm also increased its bank loans to £17m in 2013 with a 2.6% interest rate, compared to £13m in 2012 at 3.2%.

jaishree.kalia@legalease.co.uk

Legal Business

Mid-market feeding frenzy: Addleshaw, Bristows, Field Fisher and Irwin Mitchell unveil lateral hires

Mid-market feeding frenzy: Addleshaw, Bristows, Field Fisher and Irwin Mitchell unveil lateral hires

The New Year lateral hiring spree has gathered momentum, with Addleshaw Goddard, Irwin Mitchell, Bristows and Field Fisher Waterhouse all announcing new acquisitions today (7 January).

Leeds-based Bill Gilliam will join Addleshaw’s commercial litigation team as a partner after 20 years at Eversheds, where he was head of healthcare and life sciences. His experience includes a secondment as acting head of legal in the commercial directorate of the Department of Health, and cases include procurement disputes for Covent Garden Market Authority and Roche Diagnostics, as well as assisting with the Mid-Staffordshire Inquiry.

Elsewhere, the appointment of tax investigations partner Phil Berwick from Pinsent Masons into Irwin Mitchell’s business legal services (BLS) division takes the number of new hires by the national giant to 20 in two years, and follows on from the high- profile hire of Pinsents’ former dispute resolution and litigation head Nigel Kissack in October. He is joined by Nick Dawson, a legal director in the corporate team at DWF, who joins Irwin Mitchell as partner, and senior corporate associate, Rob Laugharne, who moves to Irwin Mitchell in Birmingham from Shoosmiths.

As a former head of the tax investigations team at McGrigors, now Pinsents, since 2009, Berwick will join Kissack in Irwin Mitchell’s London office. Having left the Inland Revenue 18 years ago where he was an inspector of taxes, Berwick has worked in the investigation teams of various accountancy and consultancy firms, including four years as head of tax investigations at Tenon.

He deals with a range of HMRC’s specialist units, but is principally involved in investigations instigated by HMRC’s specialist investigations and local compliance fraud teams with expertise in advising clients on international disclosure facilities.

Chief executive for BLS, Niall Baker, said: ‘Last year, Irwin Mitchell’s turnover exceeded £200m for the first time and our BLS division played a hugely important role in this success.

‘These latest appointments speak volumes for our determination to keep expanding and are a further sign that senior advisers, not just lawyers, are excited about what we are doing and want to be part of it.’

Meanwhile, shortly after its partners voted in favour of the tie-up with Birmingham heavyweight Wragge & Co last month, Lawrence Graham will see its head of EU, competition and regulation, Rosemary Choueka, leave to join Bristows to become a partner in its competition team.

Head of competition at Bristows Pat Treacy commented: ‘We are delighted to welcome Rosemary to our very busy team. Having gained experience at the European Commission and having subsequently advised businesses on all areas of competition law, she is also experienced in general EU law and on regulatory issues in sectors including technology, healthcare and waste.

‘Our team has grown significantly over the past few years to cater for increased workload, so her arrival is very timely as increased competition focus on high technology industries seems likely to lead to greater demand for sector specialists with a deep understanding of competition issues.’

This comes as Bristows announces the promotion of three associates Dominic Adair and Jeremy Blum (intellectual property); and Adrian Sim (IT) to partnership in May.

Finally, Field Fisher Waterhouse’s corporate team has been bolstered by the arrival of Mayer Brown corporate partner Mark Walker. Walker, who joined FFW yesterday (6 January) had been a partner at Mayer Brown since 1996 and spent six years in the firm’s Frankfurt office. FFW managing partner Michael Chissick said that Walker’s experience in private M&A, venture capital, family office and private equity investments in the UK and Germany, would fit particularly well with the firm’s strategic focus, as does his experience in technology transactions.

francesca.fanshawe@legalease.co.uk

Legal Business

International markets – Addleshaw hires third partner in Hong Kong and rebrands to Francis & Co

Having launched in Hong Kong last summer, Addleshaw Goddard has forged ahead with a number of developments in the region including adding a third partner, Daniel Wan, and rebranding following the arrival of Nigel Francis at the end of 2013.

Wan, who joins from Jun He and previously worked at Herbert Smith Freehills, specialises in M&A and equity capital markets, particularly pre-initial public offering (IPO) investment and restructuring and post-IPO regulatory and compliance matters.

He brings with him two associates, Simon Wong and Yen Yum, and the trio will work alongside corporate partner Brett Stewien, who joined Addleshaws from DLA Piper in August last year to launch the new office.

Wan’s arrival follows that of Francis, the former head of litigation and employment at Minter Ellison, which has seen the local office change its name from Stewien & Co to Francis & Co.

Francis was hired at the same time as Stewien and Andrew Carpenter, Addleshaws international division managing partner, said: ‘Nigel is very well known in the local market and it was always the intention that the practice would adopt his name once the various regulatory requirements were completed. Daniel is similarly well known in Hong Kong and the PRC for his corporate finance practice which has continued to thrive even in difficult markets.’

The Hong Kong team recently re-located to new premises in Citibank Tower in the heart of Hong Kong’s business district as part of immediate plans to grow the office to 12 full time lawyers.

Carpenter added: ‘The combination of Nigel, Brett and Daniel in Hong Kong and Jamie Harrison in Singapore is opening up new markets in Greater China for us. The combination of that platform with our capability in the GCC, and increasing focus on Africa, Korea, Japan and Malaysia, is an exciting proposition and we are very encouraged by the early opportunities flowing from our investment and increasing capability.’

Addleshaws’ other international offices include Dubai, Oman and Qatar.

caroline.hill@legalease.co.uk

Legal Business

No dishonesty but two Addleshaws partners handed £5,000 fine at tribunal following ‘discrepancies’

No dishonesty but two Addleshaws partners handed £5,000 fine at tribunal following ‘discrepancies’

It won’t rank near the summit of publicity-hogging mis-conduct cases seen at major law firms in recent years but two Addleshaw Goddard partners have each been fined £5,000 after being summoned to the Solicitors Disciplinary Tribunal (SDT) this week.

The financial penalty, which came following an investigation into discrepancies over disbursements, had been agreed by the Solicitors Regulation Authority (SRA) and endorsed by the SDT. The hearing on Tuesday (5 November) was uncontested.

As reported last week, property partner Emmett Peters and finance partner David Wilson were referred to the SDT by the SRA after a separate investigation.

The pair, who were fined for ‘mis-describing’ disbursements, were represented at the tribunal by Tim Dutton QC, a highly prominent silk at Fountain Court and a former chair of the Bar Council.

The SRA accepted that there was no lack of integrity on the part of either individual and that the disbursements, however they may have been described, were both properly incurred and chargeable to the clients concerned. The SDT heard Wilson had caused discrepancies in 74 legal bills, while Peters had in 94.

There was no allegation that the pair, who will also contribute towards costs incurred by the SRA, were dishonestly involved or seeking any personal gain and it was recommended that the matter be concluded without the need for a substantive hearing.

Dutton argued that both had already suffered financial penalties after being held back at 2011 partnership levels, in one case amounting to a six-figure loss.

Addleshaw is not subject to any further disciplinary action and the SRA noted the firm’s constructive approach in relation to these matters. No clients suffered any loss.

In a statement, Addleshaw said that its financial systems had been through a ‘thorough review’ by the accountant Deloitte, who had declared the law firm’s systems ‘fit for purpose’.

The SRA referred Peters and Wilson to the SDT after discrepancies were identified in the course of an enquiry into the activities of a former partner Mark Gilbert, which the regulatory body had been investigating.

Addleshaw stressed that the referral for the two current partners was unlinked to the actions of Gilbert, who resigned from the firm in April 2011. The circumstances and matters in relation to Gilbert remain before the SDT.

Francesca.fanshawe@legalease.co.uk

Legal Business

Addleshaw stands by its men as two partners face SDT hearing

Addleshaw stands by its men as two partners face SDT hearing

The legal profession has seen a handful of high profile cases of commercial lawyers caught out in allegations of fraud or questionable behaviour in recent years, a process that often involves the employing law firm rapidly turning on its own staff.

But while the Solicitors Regulation Authority (SRA) has referred two partners of Addleshaw Goddard to the Solicitors Disciplinary Tribunal (SDT) following an investigation into disbursements, the firm looks to be standing by its men.

The SRA referred property partner Emmett Peters and finance partner David Wilson to the SDT after discrepancies were identified in the course of an SRA enquiry in to the activities of a former partner Mark Gilbert, which the regulatory body had been investigating. Addleshaw stressed that the referral for the two current partners was unlinked to the Gilbert enquiry. Wilson and Peters are due to attend an initial hearing next week at the SDT.

Addleshaw issued this statement: ‘In the course of our and the SRA’s enquiries into discrepancies relating to the personal expenses and disbursements of Mark Gilbert, a property partner who resigned from the firm in April 2011, a number of other unconnected discrepancies were identified relating to the description of certain disbursements in some of the matters of Emmett Peters and Dave Wilson. Our investigation satisfied us that those disbursements were properly incurred and that neither individual was dishonest or involved in any personal gain.’

The statement also stressed that Addleshaw had co-operated with the SRA and was not itself being investigated and that no client had suffered any loss. In the context of the two partners, Addleshaw’s statement adds: ‘Emmett Peters and Dave Wilson both… co-operated fully with the SRA investigation and there is no suggestion from the SRA in referring them to the SDT that the relevant disbursements were not properly incurred, nor is any allegation made that either Emmett or Dave was dishonestly involved or seeking any personal gain.’

Francesca.fanshawe@legalease.co.uk

Legal Business

Hong Kong drive: Addleshaws makes foray into local law two months after HK launch

Addleshaw Goddard’s objective to offer capability across the major disputes and arbitration centres has been given a boost by its launch today (8 August) of a local law practice in Hong Kong through a formal tie up with a newly established local firm led by partners from Minter Ellison and DLA Piper.

The new office will be led by former head of litigation and employment at Minter Ellison, Nigel Francis, and DLA Piper corporate partner Brett Stewien, who have practiced in Hong Kong for 25 and 14 years respectively.

Stewien, who was made partner at DLA’s Hong Kong office in 2011, has already started, while the starting date of Francis, a former legacy Herbert Smith partner who is qualified in both Hong Kong and England and Wales, is as yet unconfirmed.

Once approved by local authorities, thought to be after at least three years, the associated firm will be fully absorbed into Addleshaws and the duo will become full partners at the firm.

The news comes after the firm established an English law office in Hong Kong in May, the fifth international base for the firm, which has, in the last 18 months, launched in Dubai, Oman, Qatar and Singapore.

Managing partner Paul Devitt told Legal Business that the new practice forms part of the firm’s international strategy to open own offices in international arbitration centres.

‘Principally we could see initially a real opportunity in disputes and international arbitration, especially because with Dubai, Singapore and Hong Kong, we effectively cover all of the disputes and international arbitration centres, other than New York and Paris, and that feels very strong place to be,’ said Devitt.

‘We don’t think, however, that our opportunities are limited to disputes work. In the Gulf we’ve built out in Oman and Qatar additional corporate, commercial and financing capability, and clearly in Hong Kong we have corporate. We continue in those own offices that we’ve [already] established [making] additional investments and bringing in individuals that bring in other capabilities,’ Devitt added.

The new office will work in close partnership with the firm’s Singapore base, which is led by litigation partner Jamie Harrison, who joined Addleshaws from Winston & Strawn in 2009.

While the firm has no current plans to open elsewhere, Devitt said the firm is considering various models for international expansion, including exclusive relationships with local firms. Addleshaws currently has one such formal alliance with best friend firm Hashidate Law Office in Tokyo, which it entered into in June this year.

The move in Hong Kong comes as a number of international firms have boosted their local law practices, including Jones Day and DLA Piper, which last month hired Mayer Brown banking and finance partner Benjamin Sandstad.

Francesca.fanshawe@legalease.co.uk