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    Partner Retirement in Law Firms: Strategies for Partners, Law firms and Other Professional Services
    Partner Retirement in Law Firms: Strategies for Partners, Law firms and Other Professional Services
    Partner Retirement in Law Firms: Strategies for Partners, Law firms and Other Professional Services
    Ebook203 pages2 hours

    Partner Retirement in Law Firms: Strategies for Partners, Law firms and Other Professional Services

    By Globe Law and Business

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    About this ebook

    Many professionals, especially those who own all or part of their firm, find it difficult to think about retirement. In particular, those who practise their chosen profession into their sixties and seventies often worry that when they retire they will miss the challenge, excitement, companionship, mental stimulation and sense of fulfilment that their work provides. After all, to a great extent we are what we do, and winding down raises questions about self-esteem and one’s value to society. Moreover, professional life increasingly conditions us to place the interests of clients, customers and colleagues so far in front of our own interests that personal and family issues are sometimes neglected, creating additional challenges.

    With these challenges in mind, the notion of “never doing today what can be done tomorrow” can be seductive. However, Partner Retirement in Law Firms is designed to help reduce procrastination and encourage proactive retirement planning. In this new book, expert contributors provide tips and guidance for navigating the difficult aspects of retirement in the broad context of career planning, including:
    •the financial consequences of retirement;
    •legal matters;
    •day-to-practicalities;
    •accounting and tax;
    •psychological considerations; and
    •succession planning.

    Partner Retirement in Law Firms provides a practical guide to finding the right path to retirement and is aimed at individual partners seeking to transition from professional to retired life seamlessly and with minimal stress. In addition, it makes an invaluable resource for law firm HR and career development teams.
    LanguageEnglish
    PublisherGlobe Law and Business
    Release dateMar 5, 2020
    ISBN9781787423435
    Partner Retirement in Law Firms: Strategies for Partners, Law firms and Other Professional Services

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      Book preview

      Partner Retirement in Law Firms - Globe Law and Business

      title

      Editor

      Ronnie Fox

      Managing director

      Sian O’Neill

      Partner Retirement in Law Firms: Strategies for Partners, Law Firms and Other Professional Services is published by

      Globe Law and Business Ltd

      3 Mylor Close

      Horsell

      Woking

      Surrey GU21 4DD

      United Kingdom

      Tel: +44 20 3745 4770

      www.globelawandbusiness.com

      Printed and bound in Great Britain by Ashford Colour Press Ltd

      Partner Retirement in Law Firms: Strategies for Partners, Law Firms and Other Professional Services

      ISBN 9781787423428

      EPUB ISBN 9781787423435

      Adobe PDF ISBN 9781787423442

      Mobi ISBN 9781787423459

      © 2020 Globe Law and Business Ltd except where otherwise indicated.

      All rights reserved. No part of this publication may be reproduced in any material form (including photocopying, storing in any medium by electronic means or transmitting) without the written permission of the copyright owner, except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under terms of a licence issued by the Copyright Licensing Agency Ltd, 6–10 Kirby Street, London EC1N 8TS, United Kingdom (www.cla.co.uk, email: licence@cla.co.uk). Applications for the copyright owner’s written permission to reproduce any part of this publication should be addressed to the publisher.

      DISCLAIMER

      This publication is intended as a general guide only. The information and opinions which it contains are not intended to be a comprehensive study, or to provide legal or financial advice, and should not be treated as a substitute for legal advice concerning particular situations. Legal advice should always be sought before taking any action based on the information provided. The publishers bear no responsibility for any errors or omissions contained herein.

      Table of

      contents

      Preface

      Ronnie Fox

      Fox & Partners

      I. Partner retirement – a firm’s perspective

      Corinne Staves

      Maurice Turnor Gardner LLP

      1.Background

      2.Be prepared

      3.Voluntary retirement

      4.Involuntary retirement

      5.The exit

      II. Legal issues from the individual partner’s point of view

      Ivor Adair

      Caroline Field

      Fox & Partners

      1.Objectives

      2.Considerations for retiring partners negotiating their exit

      3.The default regime – the Partnership Act 1890 and Limited Liability Partnership Act 2000

      4.The exit routes

      5.Challenging expulsion/compulsory retirement and tactical considerations for partners

      6.Business protection by the firm – risks for the partner

      7.The deal and beyond

      III. Accounting and practical considerations

      Paul Beber

      Cecil Associates

      1.Introduction

      2.Retirement date

      3.Impact of partnership structure and profit-sharing arrangements

      4.Accounts at the date of retirement

      5.Goodwill and anti-embarrassment arrangements

      6.Non-partnership assets

      7.Financial settlement/payments

      8.Post-retirement issues

      IV. Tax considerations

      Nicky Owen

      Crowe U.K. LLP

      1.Introduction

      2.Lead-up to retirement

      3.Equity changes

      4.Profit share

      5.Capital invested in the firm

      6.Salaried member/partner

      7.Retiring as a partner

      8.Retirement date

      9.Tax reserves

      10.Self-assessment tax return

      11.Post retirement

      V. The emotional impact of partner retirement

      Micheline Hogan

      Psychodynamic psychotherapist

      1.Introduction

      2.Plan in advance

      3.Alternative strategies

      4.Defining your post-retirement role

      5.Concluding thoughts

      VI. Financial aspects of retirement planning: a 10-point retirement plan

      Veronica Mann

      Talis Financial Advisers

      1.Make your plan

      2.Where will it come from?

      3.Investment risk

      4.There’s no point in planning if disaster strikes…

      5.Legacy planning

      6.Summary: your 10-point retirement plan

      VII. Another career?

      Roderick Chamberlain

      Career Guidance Services Limited

      1.Introduction

      2.When should I do it?

      3.How should I think about it?

      4.What should I do about it?

      5.Author’s messages

      6.Summary

      About the authors

      About Globe Law and Business

      Preface

      Ronnie Fox

      Fox & Partners

      Why do partners in professional firms find it so difficult to contemplate, or even talk about, retirement? Having spoken to many partners, I have concluded that the most common reasons are as follows.

      First, the practice of most professions is permitted only after the successful completion of lengthy academic, practical and ethical training, during which the subject of eventual retirement is rarely if ever mentioned. Almost everything which I learned at school and at university is completely irrelevant to the practice of law today. Lawyers who qualified more than 30 years ago have had to acquire on-the-job training in many topics relevant to their daily work – artificial intelligence, cybersecurity, financial management, psychology, leadership, delegation, business development, presentation, communication and so on. But not how to retire gracefully; even today, there are relatively few sources of knowledge on the subject of retirement and succession.

      Secondly, a thread running through professional life is the importance of placing the interests of clients above one’s own personal interests. The pressures of client demands and other aspects of legal work are often so great that practitioners fail to set aside sufficient time to plan their own careers or to adjust for the developments associated with ageing.

      Thirdly, addressing the prospect of major life changes makes many people feel uncomfortable. Their identity is intimately related to their work – and to going out to work. They are what they do. Planning for succession and retirement involves facing up to mortality.

      This report offers a variety of practical and technical suggestions as to ways in which lawyers and other professionals can plan for an enjoyable retirement. I am extremely grateful to each of the authors (solicitors, accountants, a psychotherapist, a career consultant and a financial adviser) who have generously shared their knowledge by contributing a chapter. The contents of this report reflect the authors’ understanding of the law and best practice as at 1 December 2019.

      This report is designed to be read from beginning to end; specific cross-references between chapters seem unnecessary. You will not find all the answers in this book, but you may be prompted to ask yourself relevant questions. Seek appropriate expert advice to generate answers applicable to your own personal circumstances. If you do not ask yourself those questions and seek answers, nobody else can be relied on to do so for you.

      One unknown faced by those planning to retire is often how their significant other will react. Nearly 30 years ago, in the well-known Blondie comic strip, Kimberly said that her husband had retired a couple of months previously and was now sitting around the house all day driving Kimberley batty. Kimberley insisted, I married him for better or worse, but not for lunch!.

      On a good day, my wife says that she is surprised by how much I am enjoying spending more time at home and with the family – and even more surprised that she is enjoying having me at home…

      I. Partner retirement – a firm’s perspective

      Corinne Staves

      Maurice Turnor Gardner LLP

      A professional firm can handle a partner’s retirement very badly or very smoothly. Most partner exits sit somewhere in between. Firms can usually achieve the latter by sticking to a simple, six-word motto:

      Be prepared. Be right. Be nice.

      1. Background

      This chapter explores some key issues for professional firms when a partner leaves the firm. There are essentially only two routes for a partner to leave a firm:

      • voluntary retirement, which includes both end-of-career retirement and moving elsewhere; or

      • involuntary expulsion, encompassing expulsion for cause and no-cause removal.

      The firm needs to be prepared for both.

      2. Be prepared

      2.1 Legal framework

      (a) Structure

      The vast majority of UK professional firms operate as limited liability partnerships (LLPs), although some operate as limited companies and a few remain as general (unlimited liability) partnerships. In the United Kingdom, many professions now allow firms to be publicly listed companies, often with LLPs within the corporate group.

      Many larger and international firms have a network of associated entities and undertakings. These can range from a ‘one-firm’ structure with centralised management and global profit sharing, where everyone stands (or falls) together, to a loose franchise-style arrangement between separately managed businesses, often with little legal connection other than shared branding and a set of ‘club rules’.

      For simplicity, this chapter assumes that the departing partner is a member of a UK LLP, although key differences for partners of a general partnership will be highlighted. The term ‘partner’ is adopted for both throughout for simplicity.

      (b) Default regime

      A simple framework of default rules applies to LLPs.¹ While the key components of the LLP and members’ relationships are addressed, the default rules are not sophisticated enough to govern a modern professional firm.

      LLP default rules

      • Capital and profits shared equally.

      • All members involved in management.

      • Unrestricted access to LLP books and records for all members.

      • Duty to account to LLP for unauthorised separate profits.

      • Majority decision making, but change of business requires unanimity and no power to expel by majority.

      Mercifully, the applicability of the default regime is subject to contrary agreement between the members and the LLP in an LLP agreement. Well-prepared firms ensure that their written agreement includes a full suite of exit-related provisions.

      (c) Key LLP agreement exit provisions

      From the firm’s perspective, the inclusion of the following clauses will be vital.

      Voluntary retirement: There must be power for members to give notice to retire voluntarily. A well-drafted provision will clearly specify how and to whom notice should be given (and align with the notices provision which is usually included as boilerplate).

      There is no typical notice period, as firms have different attitudes to managing tensions in this period. A longer period may allow for an orderly handover, enable the firm to cement relationships with clients and prevent a new firm from benefiting from the departing partner’s contribution; but the departing partner will continue to earn profit share during the notice period.

      The applicability of the default regime is subject to contrary agreement between the members and the LLP in an LLP agreement. Well-prepared firms ensure that their written agreement includes a full suite of exit-related provisions.

      Professional firm notice periods tend to range from three months to one year, with six or nine months probably being most common. Sometimes a distinction is drawn so that fixed share or junior equity partners have a shorter notice period.

      The firm should have the power to shorten the notice period unilaterally to enable it to manage the timing of partner exits. To give partners a degree of financial certainty, this is usually coupled with the requirement that profit share for the full notice period (or an equivalent other payment) is still paid. This decision-making power would ideally be vested in a managing partner or board, rather than the full partner body, as the firm may need to move nimbly when negotiating exit terms.

      Expulsion for cause: Firms should always have the power to expel partners for cause, to ensure that the firm is not saddled with an undesirable partner.

      Causes should include:

      • material breach of the agreement (and firm policies/procedures);

      • criminal conviction;

      • professional misconduct;

      • loss of regulatory permissions;

      • bankruptcy; and

      • failure to perform usual duties for a prolonged period (eg, nine or 12 months).

      It is in the firm’s interests if the power to determine whether or not an expulsion event has occurred is vested in the firm (eg, in the managing partner or management committee).

      Expulsion without cause: Market practice has evolved over the past 20 years and most firms now include a power to expel or remove without cause in their LLP agreements. This provides flexibility for firms to manage partners, and the composition of the partner body as a whole, without needing to provide compelling evidence of ‘bad’ behaviour. That said, the principles of natural justice mean that in practice, partners who are to be the subject of a removal vote are usually told the reasons for the proposed vote and given the opportunity to present their case (see further below).

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