Addleshaw Goddard has handed £12m of its profits back to partners early because of concerns that it may not be safe leaving the money in the bank.
The national firm paid all equity partners their last two drawings from the 2007-08 financial year in October — even though they were not due to be paid until November 2008 and February 2009.
Addleshaws made the payments with two provisions. Firstly, that the firm retains the right to call the profits back if the LLP needs the money for cash flow purposes. Secondly, partners must put no more than £50,000 into a single savings account — the individual amount protected by Government guarantees in the event of a bank collapse.
The measure only applies to this financial year with quarterly profit payments for the 2008-09 period expected to remain in four separate payouts to be distributed in May, August, November and February.
The profit payout leaves Addleshaws with a £10m cash balance.
Addleshaws managing partner, Mark Jones told Legal Week: “This has been an exercise in risk management. We thought it better to let the partners have their profits, subject to two conditions, and be able to invest them in a protected environment, rather than leave the money in bank accounts which did not have the benefit of that protection.”
He added: “Even in this uncertain climate the firm had cash balances which allowed it to do that without recourse to borrowings, so there was no compelling need to keep partners’ quarterly profit drawings locked in the firm.”
The unusual move contrasts sharply to national rival Eversheds, which suspended the two quarterly profit distributions to partners due in November and February 2009 after a number of cash management targets were missed.
Allen & Overy partnership specialist Richard Turnor commented: “This is an option for a firm with a very strong cash position that can afford to distribute its reserves early. But many firms will consider it prudent to retain all reserves and to protect their cash positions.”
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