King & Wood Mallesons’ (KWME’s) European arm has told all staff that they will not receive any salary payments ahead of the firm’s imminent administration as the firm’s main lender Barclays will no longer authorise the payments.

European managing partner Tim Bednall sent an all-staff email Tuesday confirming that Barclays is no longer willing to approve the weekly salary payments that staff had been expecting to receive in January.

The decision means staff have effectively worked for free so far this month and will now have to apply to the firm’s administrators to attempt to claim back their pay for this period.

They had been told before Christmas that they would be paid on a weekly basis, with the first payment expected last Friday.

In the email Bednall states: “Barclays, our bankers, indicated to me on Thursday evening that they were not willing to approve the salary payments due to you. I made a proposal to the bank on Friday to counter this, asking that essential payments including salaries be paid. This proposal was rejected on Friday. I made a further proposal to ensure salary payments could be made on Sunday and this, also, was rejected. A final proposal was submitted to the bank last night and, with deepest regret, this too was rejected this morning.

“I appreciate that the position the bank has taken puts you all in a difficult position and I am very sorry that there is nothing further that I can do to cause the bank to change its mind. Although Barclays stands to lose a substantial amount of money it will have benefited by around £5m in the last week in terms of business receipts and anticipated proceeds of the sale of parts of the business.”

“It’s very disheartening,” one lawyer at the firm told Legal Week. “They keep telling us to remember the clients but it’s very hard to do that when it seems the management cash flow is ok and we have all been shafted. I’m sad to see it all coming to an end. The general feeling in the office is one of despair.”

KWME filed a second notice Tuesday of its intent to appoint administrators, with this expected to happen within days even though the firm technically has 10 working days in which to do so.

The documents show that restructuring company Quantuma has replaced AlixPartners as proposed administrators to the firm, with Andrew Hosking and director Sean Bucknall named on the documents. Bednall’s email states that this change occurred because AlixPartners was concerned about funding.

After today’s filing KWME has 10 working days until it must file for administration, although the business is expected to enter administration far sooner. The extension is intended to give China more time to finalise a deal to retain parts of the legacy SJ Berwin business.

The China arm is in talks to keep a number of European partners, including banking partner Vanessa Docherty and corporate partners Joseph Newitt, Greg Stonefield and Wang Lianghau among those in discussions to join KWM’s Chinese arm, along with a 10-lawyer London litigation team.

It is thought that KWM China could retain partners in eight out of nine KWME offices: Brussels, Dubai, Frankfurt, London, Luxembourg, Madrid, Milan and Paris. The firm’s Munich office is expected to close this month.

Legal Week reported Monday that Mishcon de Reya and Simmons & Simmons had become the most recent firms to take on KWME partners, with Reed Smith also set to take at least three more partners across Europe following its recent hires of London tax head Gareth Amdor and financial regulatory partner David Calligan.

Last week, McDermott Will & Emery announced its hire of KWME senior partner Michael Cziesla as a corporate partner in Germany.

Numerous other firms have picked up partners including Addleshaw Goddard, Baker McKenzie, Covington & Burling, Debevoise & Plimpton, DLA Piper, Fieldfisher, Goodwin Procter, Greenberg Traurig, K&L Gates, Keystone Law, Macfarlanes, Orrick, Herrington & Sutcliffe, Proskauer Rose, Stephenson Harwood and Winston & Strawn.

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