There is a lot to think about when partners are leaving firms and joining new ones, so partners and/or recruitment professionals could lose sight of the really fundamental points to consider.
As a reminder, Partner Corinne Staves shares her top tips for partner moves and exits below:
Partner Exits –
5 Top Tips when Reviewing your Current Firm’s Agreement
- What is your notice period? Can it be shortened?
- Can you be put on garden leave? Duties as a partner apply until exit date, including acting in the best interests of the firm and keeping information confidential.
- What is your final year profit share? When do you receive back your capital, undistributed profits and tax reserve?
- Does that work with your plans, your partner loan repayment terms and your new firm’s capital contribution requirements?
- Are there post-exit covenants which restrict your plans?
You may be able to negotiate variations to the default exit arrangements in a retirement deed.
Partner Moves –
5 Top Tips when Reviewing the New Firm’s Agreement
- Can you be forced to contribute more capital?
- How and when can your profit share be changed or your drawings/distributions reduced?
- Are you comfortable with all your duties?
- How can you be demoted or removed?
- When you leave, are there covenants affecting your potential future plans? When do you receive back your capital, undistributed profits and tax reserves?
You may be able to negotiate variations to your new firm’s agreement. Even if not, it is important to understand what you are signing.
Also, do not forget to review the firm’s accounts. Is it profitable? How much cash does it carry? Is there any major expenditure or new liability expected for the year or so ahead, such as an office move?
If you are a partner considering a move/exit and would like to discuss the particular circumstances of your situation, or if you have any other questions, please contact Partner Corinne Staves, who specialises in partnership law.