Weil Gotshal's ten year capital repayment plan for departing partners
Weil Gotshal & Manges has started holding selected departing equity partners to ten year capital repayment plans, Legal Week has learned.
September 01, 2014 at 07:48 AM
3 minute read
Weil Gotshal & Manges has started holding selected departing equity partners to ten year capital repayment plans, Legal Week has learned.
The move, which industry sources have called unprecedented, is understood to be applied in cases where partners are leaving for competitors, and is not a binding requirement for all senior lawyers exiting the US-headquartered firm.
Though Weil said it has not changed its repayment policy – which is to return partner capital within five years – former and current partners have told Legal Week that provision to waive the policy has been exercised in a number of instances for the first time in the last year. The decision came in the wake of a major restructuring of the firm's business, announced last summer.
Agreements seen by Legal Week state that ex-partners' capital in the firm is to be repaid over 10 years in equal annual instalments "provided that, at the time that a payment falls due, you have not been and are not in breach" of the agreement.
Several partners who have been held to the agreement have expressed their frustration at what they feel is a punitive measure for exiting the firm.
On a number of occasions, ex-partners facing the ten-year repayment plan have asked their legal representatives to negotiate with the firm and reduce the repayments to five years.
"It is our policy to pay capital back to partners who leave or retire from the firm over five years," a Weil spokesperson told Legal Week. "Weil remains in a financially sound position, does not have a shortfall of cash and continues to have no debt."
Weil declined to comment on the reasons for it waiving the policy. However, one current partner said the firm had to provide for more cash for some up-front payments to certain new lateral partners who were being held to onerous conditions by their previous firms.
Separately, Weil sources said the firm has also this year upped its partner capital contribution requirement from 30% to 50% of target compensation, to be taken from drawings over several years.
Weil has lost more than 40 partners in the last year, some of whom were swiftly repaid capital held in the firm after accepting packages to leave. However, others who departed of their own accord have faced the possibility of the delayed capital repayments.
Weil's London office has recently suffered two high-profile partner exits: head of banking Stephen Lucas, who joined Kirkland & Ellis earlier this summer, and European head of high yield Gil Strauss, who is set to move to Simpson Thacher & Bartlett.
This followed a significant number of London departures in 2013, and a raft of exits from the firm's US offices, including 17 partners packing up in Houston and Dallas alone, many of whom exited to Sidley Austin.
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