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Bruce Gripton, head of the commercial services group at Eversheds, has considerable experience of partnership issues and has recently advised both his own and other firms on converting to limited-liability partnerships (LLP). Caroline Poynton talks to him about the Eversheds conversion and why it reflects a growing trend among professional firms.

1 September 2004

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Bruce Gripton, head of the commercial services group at Eversheds, has considerable experience of partnership issues and has recently advised both his own and other firms on converting to limited-liability partnerships (LLP). Caroline Poynton talks to him about the Eversheds conversion and why it reflects a growing trend among professional firms.

Can you tell me more about your role in advising on converting to LLP status?

Historically, I already played a part in the structure of the partnership in that I worked with the Frère Cholmeley Bischoff partners when the firm merged with Eversheds in August 1998. Again, in 2000, I worked on behalf of the London partners when we moved from being seven firms to becoming a single entity. I had also done some advisory work with other partnerships, so when the Eversheds conversion to LLP came up, the firm asked if I could help.

What was behind Eversheds’s decision to convert to LLP in 2003?

Part of it was a follow up to several meetings we’d been having on profit sharing where people would ask management about converting to LLP. We then had a consultation exercise and it was generally felt that it was a desirable future. We were concerned that with the size of Eversheds, with its many international offices, people wouldn’t have an overall grasp of what was happening in the firm. By becoming an LLP, we could provide a lot more security across the organisation.

I understand that you also have experience of advising accountancy firms on conversion?

Yes, a couple of which are happy for us to announce their names: RSM Robson Rhodes, which became an LLP on 2 May 2003; and Grant Thornton, which became a UK LLP on 1 July 2004.

It has taken a while for the trend among partnerships to convert to gather pace. Why do you think that is?

There are several reasons. Initially, firms wanted to see whether clients would be hostile to them converting, so they wanted to wait and see other firms go through the process first. Second, for larger firms, there are quite a lot of international tax issues. Third, it involves a considerable degree of time and effort to actually make the conversion.

At first, there was a concern that clients would turn around and say that if we can’t sue you, then we’ll go to some other law firm that we can sue. But generally that hasn’t happened and firms are a lot more confident. Certainly, Eversheds got very little negative feedback and I think that’s been the experience of most of the firms that have converted.

Why do you think clients have proved so amenable to conversion?

I think they took the view that if they sued, they would rely on the firm’s insurance anyway, rather than individual lawyers. After all, I think it is generally known that the chances of recovering money from an individual partner would be fairly small. The other thing is that large suits against law firms aren’t that common so it wasn’t a major concern among clients in the first place.

What are the issues for smaller firms converting to LLP?

Some could choose to take a very minimilist approach. For example, the law allows you to adopt the same partnership agreement within the LLP, so conversion could merely involve filing a form at Companies House. However, most firms take the opportunity to revise their partnership agreement. The major irritation in becoming an LLP is having to write to all your clients and change your terms of business (because they don't make sense post LLP), and amend all your addresses/e-mail, etc. If firms are in the process of changing their constitution anyway, they may well decide to convert at the same time.

What are the benefits of conversion?

From my perspective, it’s much easier to administer an LLP than it is a partnership.

I wouldn’t say that’s a sufficient reason to convert, but, for example, with leases, we’ve found that landlords often prefer to have an LLP as tenant, rather than individual partners, because the LLP has got published accounts and can be given a credit score, which to some extent improves its capital value. Eversheds had, as do most partnerships, a building in London, with leases on each separate floor. Every time there was a change of partners, or someone retired, you had to go and change the title on potentially 50, 60 or 70 leases. It is a lot easier using an LLP because it’s effectively a company where the managing director has sufficient authority on behalf of the organisation to sign documents, open bank accounts, etc.

I also know that one of the reasons that firms are converting is simply because everybody else has and there are now risks if you don’t. For example, if somebody is offered a job with an LLP firm or a traditional partnership, there is a good chance that the talent will go to the LLP, where partners may feel more secure.

What about your role in the future?

Most of the accountancy firms among the top ten have converted. We have had some enquiries from smaller firms, so I expect there’ll be two or three of them over the next year with which I may be involved. Among law firms, I don’t know whether they’ll decide to advise themselves on conversion. On a friendly basis, I have advised some partners who I know in four or five other firms who have converted or are thinking about doing so. However, I was reading a list a couple of weeks ago, which said that only one of the firms that have so far converted has actually used external advisers.

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Risk & Compliance