Mishcons gears up for switch to all-equity LLP model
Mishcon de Reya is set to overhaul its partnership model to an all-equity structure and become a limited liability partnership (LLP) by the end of autumn next year.
August 19, 2014 at 12:08 PM
3 minute read
Mishcon de Reya is set to overhaul its partnership model, embracing an all-equity structure and becoming a limited liability partnership (LLP) by the end of autumn next year.
As part of the proposed model, voted through by partners, Mishcons will remove its 65-strong fixed-share partner rank, with all partners expected to move into the equity. The firm currently has 37 equity partners.
All partners are expected to contribute capital when the firm converts to an LLP, although the level of contribution from junior equity partners is yet to be revealed.
The firm's current structure contains legal directors, fixed-share partners (known as junior partners) and equity partners (known as senior partners). Under the new model, full equity partners will become "senior equity partners" while its fixed-share contingent will be known as "junior equity partners".
Partners at the firm said Mishcons' impending office move to Africa House on London's Kingsway, estimated to cost around £3m more annually than its current offices, was the catalyst for the move.
The new model is likely to affect the firm's profit per equity (PEP) figures, which was £975,000 in 2013-14, up on £840,000 for the previous financial year.
The revamped structure comes about after HMRC changed the way partnerships are taxed, with new regulations having come into effect in April this year.
As part of the new rules, partners must meet at least one of three conditions to avoid being treated by tax authorities as an employee of the business: at least 20% of an individual's pay must be dependent on the firm's profits; at least 25% of their fixed pay must be contributed in capital; or they should demonstrate they have significant influence on the overall partnership.
Mishcons registered as an LLP in 2008 but it has since remained dormant. There are now two remaining firms in the UK top 50 by revenue that have not converted to LLP status: Slaughter and May and Osborne Clarke.
Mishcons has also applied for an alternative business structure (ABS) licence after a number of non-lawyers took up positions on its board and senior management team. These included chief operating officer Bambos Georgiou and head of HR Vanessa Dewhurst. If the firm is approved for a licence, they will be able to take stakes in the partnership.
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