City heavyweights put LLP switch on ice
Legal Week reports
March 22, 2006 at 07:03 PM
2 minute read
Four of London's largest firms have postponed plans to convert to limited liability status, citing continued tax problems and regulatory hurdles.
Norton Rose, Lovells, Freshfields Bruckhaus Deringer and Linklaters all confirmed this week that they are to shelve expected conversions to limited liability partnerships (LLPs), primarily because of delays to French tax reforms.
City firms had been lobbying for amendments to French tax regulation to avoid double taxation of local practices of UK-registered LLPs, but it is conceded that such reforms will not materialise until the end of the year at the earliest.
Norton Rose's chief executive, Peter Martyr, told Legal Week: "The issue is the legislation required in France to provide tax transparency for LLPs, and until such time as the legislation is passed, there is a significant cost in making the change."
Martyr said that a Norton Rose team, which has considered the issue for the past year, would continue to work towards conversion. He added: "We are working on resolving the issues as soon as possible."
Lovells also cited the French regulations for delaying its conversion, although the firm is expecting to revisit the issue later in the year.
Freshfields cited a number of regulatory concerns for its decision to delay its long-mooted conversion until next year. Magic circle rival Linklaters has also indicated that its conversion has been put on ice for the time being.
The rash of postponements mean that Allen & Overy looks set to remain London's only magic circle UK LLP in the short term.
Slaughter and May is one of the few top 50 UK law firms to rule out a move to the model, which is designed to limit partners' liabilities in the event of a firm-busting claim.
Concerns over LLP conversion have been further heightened by an incoming accountancy standard which professional advisers warn will force LLPs to massively inflate their recorded debt.
However, most leading UK firms are ultimately expected to move to the model given concerns that legal advisers will increasingly be targeted in the wake of corporate collapses.
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