New partner exit rules set at six months for newly merged firm

Herbert Smith Freehills is overhauling its notice period in the wake of the merger between the two firms which went live in October, with the new six-month term halving the notice period previously in place at legacy Herbert Smith. 

Partners at both firms approved the change, which is in the process of being implemented, as part of the merger terms. The six-month term, which will be imposed at the discretion of the firm, effectively doubles the notice for legacy Freehills partners exiting, as they were previously subject to just three months. 

However, it halves the period for those at the legacy UK arm, which has been notorious for holding partners to tough exit terms. Notably, in 2007, it held real estate partner Chris de Pury to a 10-month notice period, with a further 12 months of restrictive covenants once he joined Berwin Leighton Paisner. 

News of the overhaul follows a number of high-profile partner resignations from Herbert Smith in recent weeks, with senior litigation partner Kevin Lloyd set to join Debevoise & Plimpton, while corporate partner Will Pearce is exiting for Davis Polk & Wardwell.

It is understood Herbert Smith could still try to enforce a one-year notice period on these partners as they quit before the change was implemented. 

A spokesperson said: "It was agreed as part of the merger that it made sense for partners at both firms to move from their existing notice periods to six months' notice. Partners in neither firm were on six months' notice prior to the merger."

One ex-Herbert Smith partner commented: "Keeping people out of the market for a year is outdated and goes back to a time when it would cripple a 30-lawyer practice for a partner to leave. Now that firms are so much bigger, it seems unnecessary. I also don't think it's a very good advert to clients for the firm to behave like that." 

UK firms have increasingly been holding partners to notice in the wake of a string of high-profile hires by US firms, where in general partners are free to join their new firm immediately after handing in their notice. 

Clifford Chance (CC) held former funds chief Jason Glover to a six-month notice period when he quit for Simpson Thacher & Bartlett, with some of the funds team subsequently quitting for Weil Gotshal & Manges also held to notice.

Meanwhile, Allen & Overy is expected to hold Stephen Jagusch to the majority of his nine-month notice period before he joins Quinn Emanuel Urquhart & Sullivan early in 2013. 

At the start of the year, Freshfields Bruckhaus Deringer also changed its exit terms for partners, increasing its notice period for those departing from three months to six. The decision came after the magic circle firm saw a number of partners leave for rival outfits, with corporate veteran Simon Witty joining Davis Polk's City arm in January and tax partner Jonathan Cooklin also joining the US firm in the summer. 

The review of the Herbert Smith partnership deed has also seen the firm retain the threshold of equity partners required to back any move to exit a fellow member of the equity at 75% – a requirement which has been periodically reviewed at the firm.

Recent high-profile City departures from Herbert Smith

Dec 2012 Litigation partner Kevin Lloyd to Debevoise & Plimpton
Nov 2012 Corporate partner Will Pearce to Davis Polk & Wardwell
Sep 2012 Contentious regulatory partner Martyn Hopper to Linklaters