Wragges pledges to free up £5m in cash reserves
Regional giant to release cash reserves to distribute more capital to junior partners
March 16, 2005 at 07:03 PM
2 minute read
Birmingham giant Wragge & Co is to release around £5m in cash reserves as part of a move to distribute more of its capital to junior partners, Legal Week can reveal.
Senior management agreed the move at a partnership meeting last week. The capital will largely be used to cut capital contributions that junior partners make to the firm on being awarded equity.
The minimum amount partners are expected to shell out when joining the equity is thought to be around £100,000.
Wragges managing partner Richard Haywood told Legal Week: "The mood is that we could operate with less cash in credit and still be one of the most conservatively financed firms."
The move will see the top 50 UK firm cut reserves, with Wragges indicating it will now aim to hold between £5m to £10m at the bank, compared to previous years when it has held as much as £15m.
Figures available from Wragges' recent limited liability partnership (LLP) accounts show the firm last year held £13.9m at the bank – an unusually high figure given that law firms often maintain little or no credit.
The LLP accounts show that the firm currently operates with £17.8m of partners' capital.
Hayward added: "We asked ourselves, 'Do we need to operate with that size of cash pile and could we operate with a lower level?' The answer is: 'Yes, we can'."
Distributing the cash will be viewed as a way of cushioning the impact on junior partners of Wragges' recent falls in partner profits. The firm posted a 17% fall in average partner profits at £210,000 in its 2003-04 year, while turnover was largely static at £79.3m.
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