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Major U.K. Firms Cut Back Profit Payouts Amid Tough Markets
Top 15 firms Pinsent and DLA Piper have both withheld profit distributions in recent months. Pinsent has withheld its last two quarterly profit distributions, with the firm attributing the "profits distribution holiday" to a series of management responses to the recession. It is due to make its next quarterly payment as planned in December.
DLA Piper, meanwhile, held back its August distribution firmwide and has yet to decide on its next payment, due in November. The firm changed its system in 2005 to pay each partner's quarterly distributions only if billing targets are reached on a firmwide, group and individual level. Monthly distributions have continued at both firms.
The news comes as other firms, including Ashurst and Camerons, have paid out reduced quarterly distributions to partners over the last year. Ashurst confirmed that full monthly drawings had been paid out but said quarterly distributions, which are not made at predetermined rates, had been smaller in recent months.
Similarly, Cameron has also reduced distributions after introducing a system last year that ties profit payments to billing targets.
Cameron managing partner Duncan Weston said: "Our distributions policy means that, essentially, our partners don't receive all their profit distributions until our clients have paid all their bills. Therefore over the last year, as you would expect, there have been some occasions we have only paid partial distributions. We are probably no different to other sensible firms in this respect."
Elsewhere in the top 15, Lovells has not reduced quarterly profit distributions but has made it easier to do so, if required. The top 10 London firm changed its processes allowing it to reduce payments at the start of the current financial year, bringing it in line with firms such as Allen & Overy, which already had a system like this in place -- although it has not used it during the recession.
As previously reported, Eversheds and SJ Berwin have both held back quarterly profit distributions. Eversheds resumed payments in May after a six-month freeze and is on track to pay partners in November. SJ Berwin has withheld a number of quarterly distributions since November 2008 and is yet to make a decision on the next November payment.
Clifford Chance, Herbert Smith and Norton Rose said monthly and quarterly profit distributions have been paid in full and on time. Linklaters, Freshfields Bruckhaus Deringer and Bird & Bird declined to comment. Simmons & Simmons and Slaughter and May operate a different structure, with profit payments in excess of monthly drawings paid out in alignment with collections. Both have made monthly payments as normal.
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