SJ Berwin management aims to tighten up exit terms for partners
SJ Berwin is considering introducing restrictive covenants for exiting partners to counter the risk of losing client relationships and teams of associates when partners leave the firm. Partners received a memo from management earlier this month setting out the proposed changes, which follow a number of departures from the top 20 law firm in recent months.
February 16, 2012 at 07:03 PM
2 minute read
SJ Berwin is considering introducing restrictive covenants for exiting partners to counter the risk of losing client relationships and teams of associates when partners leave the firm.
Partners received a memo from management earlier this month setting out the proposed changes, which follow a number of departures from the top 20 law firm in recent months.
The proposals could see SJ Berwin introducing gardening leave provisions for the first time, as well as installing more formal measures to prevent those leaving from marketing their new platform to clients or associates. Exact details, including the length of any restrictions, still need to be finalised before partners vote on any changes to the partnership deed.
SJ Berwin is one of a minority of UK firms without formal restrictive covenants in place for exiting partners, although they are uncommon at US firms.
While the City firm's partnership deed technically requests a six-month notice period for partners, during which time a "duty of good faith" to the partnership prevents those leaving from soliciting clients or associates, in practice it rarely holds partners to notice. This means that, with no restrictive covenants, exiting partners can take clients and work straight to their new firm.
One partner said: "The deed doesn't work properly. It is always difficult to push through changes when you go from a system that has been too lax, but we are just trying to get ourselves to a point where other firms are already. In the process of doing that, we may need to make [the terms] tighter."
SJ Berwin declined to comment.
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