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Continental Breakfast: your daily update on what’s happening in Europe.
A leading expert in partnership law has dismissed the possibility of partners at King & Wood Mallesons’ European arm having to repay two years’ worth of profits if they refuse the offer of a financial bailout from the firm’s Chinese partnership.
The crippling financial penalty was one of a number of possible repercussions that were recently presented to the Sino-global giant’s European partners by U.K. law firm CMS Cameron McKenna, which has been advising KWM on its disrupted recapitalization.
The firm recently had to halt an $18.4 million capital injection program following the shock resignation of four senior partners in London. KWM’s Asian arm has offered to bail out the firm’s struggling European practice—but only if partners in the region agree to stump up $17.4 million of their own cash and commit to not leaving for at least 12 months.
A KWM source insists that the clawback scenario, which was revealed by The American Lawyer’s U.K. sister title Legal Week, was “not a threat” designed to encourage partners to accept the China deal. It would have been somewhat of a hollow threat, with a partnership law expert questioning the firm’s ability to recover already distributed profits from partners.
For a firm to claw back profits from a partner, it not only needs to be insolvent, it needs to be able to prove that the partner knew when they received the distribution that the firm was likely to become insolvent. A partnership law specialist, speaking on the condition of anonymity, says “it would be astonishing if such a state of knowledge could be proven.”
To a certain extent, it’s a moot point. In coming up with such a scenario, CMS appears to believe there is a realistic chance that KWM could become insolvent if the recapitalization doesn’t proceed. That alone should be enough to secure partner support and shows just how much is riding on the success of this deal.
British Pound In Surprise Rally
The British pound underwent a surprise rally yesterday, making strong gains against both the U.S. dollar, the euro and the Japanese yen.
The U.K. currency rose more than 1 percent against the dollar and the yen, recovering some of its post-Brexit losses to rise back above $1.25. It also gained almost 1 percent against the euro, to 1.18 euros.
The unexpected move was attributed to suggestions by U.K. prime minister Theresa May that the government may seek a transitional deal to smooth its withdrawal from the European Union and avoid companies facing a Brexit “cliff edge.”
The British pound has been severely weakened by the Brexit vote, having hit $1.50 immediately before the referendum.
Dentons To Cut U.K. Roles After Warsaw Launch
Dentons is to cut around 25 jobs in the U.K. following its opening of a new support services center in Warsaw, Poland.
The center, which opened this week, has around 70 staff providing business development, human resources, information technology and marketing services to the firm’s international offices.
A number of other international law firms have similar cost-saving outposts in Poland. DLA Piper opened a support services center in Warsaw last year, while Linklaters moved 10 financial support roles to the city.