Partner expulsion case offers lessons to LLP firms and their partners
Publicly at least, they are largely giving out a similar message – that in order to safeguard the business for the future they are acting responsibly. Partners pay outs are being deferred, drawings are being reduced by as much as 20% to 40% in some cases, salary reviews are being put on hold and bonuses frozen across the board.
Some are taking advantage of the Government’s furlough scheme on a limited basis, mostly for non-fee earners. On the whole, the impression they are seeking to create is that everyone is “in this together”, as we prepare to face the inevitable economic fall-out brought about by what may become a significantly extended “lock-down” period.
But what of the future? Sad to say it, but how long before those whose practices have held, or even remain buoyant, start to ask whether it is right that partners across all areas take an equal “hit” to their drawings?
Will those in particular demand be content to have an ongoing income squeeze to support those whose practice areas are less so, or those whose mainstay is to look after businesses that in spite of furlough and the Government’s Coronavirus Business Interruption Loan Scheme, begin to fail?
This is a very difficult issue. As firms get over the initial shock of coping with this unexpectedly grave pandemic, we may start to see a differentiation in approach – between different areas of practice and individuals. Management may start to formulate their vision for the shape of the firm post COVID-19 and as part of that process they may consider the position of their various departments. That in turn may lead them to consider the position of individual partners and their future value to the firm.
For partners who consider they may become vulnerable as a result, how are they to react? Unfortunately, they may soon need to think carefully about what strategies to employ. Ultimately if it comes to it, how would they deal with a “conversation” with the managing partner should there come to be one?
First, there are all the working arrangement alternatives to be considered and potentially put forward, such as part-time or flexible working (on a temporary or permanent basis) or a change in status. These may produce a win-win situation for the firm and the partner.
But if that is not going to work how should they prepare? As a start, they should be reviewing carefully the terms of their LLP Agreement to see what rights they have. Relevant notice periods and the right, for example, to raise an internal grievance or appeal, and if so how, and in what time-scale are important.
Keeping a close eye on personal finances and what change is feasible and what is not, is another. What would they want to do outside the firm if it comes to that, and how do the firm’s restrictive covenants impinge upon their ability to pursue such activities?
If a number of partners are asked to move on at one moment in time, might it be permitted for some to do so together (despite what it may say in their LLP Agreement), and how would that subject best be broached with the firm?
If partners are asked to take a cut to their drawings, and they are subsequently asked to leave the firm, would any termination arrangements be on the basis of their then current draw, or would the package be made referable to the position before they agreed to any rearrangement?
What of the obligation to repay capital and how does that dovetail with the loan they may have been taken out to fund it? Does this raise issues because of the current cash position of the firm?
Of course we all hope law firms will survive well this current maelstrom, and that there will be no fracturing amongst the partners as a whole whilst they see out this crisis.
But if that proves not to be the case, partners need to do what they would advise their own clients to do, namely be well prepared and light on their feet to steer themselves out of this unfolding drama in the best way possible so as to regroup and bounce back in the future when we all return to some semblance of normality.
In a case that attracted national media coverage and emphasises the crucial importance of regulatory compliance and the highest standards of professional conduct in the financial services sector, the High Court dismissed a breach of contract claim brought by an investment manager.
For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.
Global financial markets are preparing to transition away from the use of the London Interbank Offered Rate (“LIBOR”) and adopt an appropriate alternative risk free rate (“RFR”) by the end of 2021. What are the reasons for the move away from LIBOR, the progress to date in terms of identifying the Sterling Overnight Index Average (“SONIA”) as the most appropriate alternative rate in the Sterling markets, and the steps still required to be taken to ensure such markets are ready for the phasing out of LIBOR by the end of the year
At the end of last month, the Competition and Markets Authority (CMA) published a letter written to Danske Bank concerning its breach of the Small and Medium-sized Enterprise (SME) Banking Behavioural Undertakings 2002, following loans it had offered under the ‘Bounce Back Loan Scheme’.
As of 10 January 2021, all cryptoasset firms are required to be registered with the Financial Conduct Authority (FCA) under the Money Laundering Regulations.
FCA focuses on risks associated with unmonitored communications, including the use of unencrypted apps, such as WhatsApp, for sharing potentially sensitive or confidential information when working from home.
As we near the first anniversary of the extension of the Senior Managers & Certification Regime (SM&CR) to solo-regulated FCA firms, the first round of annual fitness and propriety assessments will be topping the to-do lists of many compliance professionals.
One of the impacts of the Covid-19 pandemic is that national income has fallen dramatically. In response to concerns from homeowners unable to meet their mortgage repayment requirements due to a drop in income, the Treasury and Financial Conduct Authority announced a ‘mortgage payment holiday’. This was the result of banks agreeing to allow mortgage-holders suffering from a drop in income to pause their repayments. A ban on home repossessions was put in place at the same time
The FCA announced on 5 November that it has banned three individuals from working in the financial services industry for non-financial misconduct.
How should regulated firms respond when issues come to light which call into question the fitness and propriety of a member of staff? In the second part of their series of fitness and propriety blogs, Jill Lorimer and Nick Ralph consider best practice. You can read the first part of the series by clicking here.
The Financial Conduct Authority (“FCA”) has recently provided information to their regulated firms as to good and bad practice relating to, amongst other things, the carrying out of fitness and propriety (“F&P”) assessments.
Research recently undertaken by the FCA has found that 5.35% of the UK population hold (or have previously held) cryptoassets where in 2019 this figure was 3%. For several years now the Government, the Bank of England and the FCA have been consulting on and considering how best to regulate this burgeoning market.
The news that Stephen Jones, head of UK Finance, has quit over "thoroughly unpleasant" personal comments he made in 2008 about financier Amanda Staveley, is a stark reminder to executives that their past behaviour may one day come back to haunt them.
The indications are that an increasing number of individuals are coming forward, particularly in the financial services sector, to call out wrongdoing.
Whilst the prime minister's broadcast on 10 May did not open the floodgates to City employers requiring staff to "return to work" enmasse, most firms are already drawing up plans for how that should be organised and many of us will have been thinking about what will happen when employers start to update their 'work from home' advice.
In a startling opening to a recent Newsnight, presenter Emily Maitlis began with the words “They tell us Coronavirus is a great leveller. It’s not. It's much harder if you’re poor."
Partners need to do what they would advise their own clients to do: be well prepared.
The moral arguments may well still apply but where salaries are less stellar, there may be more for an individual to lose on a relative basis and thornier issues to weigh on a practical level.
While plenty of people in all sectors are now working from home, designated key workers in the financial services industry are still being forced to go to work.
The Financial Conduct Authority (FCA) has this week published its annual Business Plan. Unsurprisingly, the emergence of COVID-19 has significantly impacted the organisation’s ability to set out its strategic focus for the next three years. While the Plan sets out the areas of priority on which it intends to focus in this period, it recognises that it may be months before the FCA is able to focus fully on the activities set out in the Plan and that the issues to be addressed may change significantly over the coming months.
Skip to content Home About Us Insights Services Contact Accessibility