King & Wood Mallesons (KWM) has held off on paying out profit distributions to its partners once again, following the recent vote to recapitalise the firm.
KWM overhauled its profit distribution structure earlier this year and moved to a monthly payment system, and until June, distributions had been paid out by the end of each month at the latest.
However, no partner profit distribution was made during July.
In a statement, the firm said: “King & Wood Mallesons confirms that no partner profit distribution was made in July. This should be viewed in the context of the recent announcement made with regards to the recapitalisation of the firm and a tax bill which was payable at the end of July.”
The recapitalisation plan was voted through at the end of July, when partners agreed to commit in excess of £14m, a move described by the firm as the third stage of its “strategic plan to strengthen its EUME business”.
The firm moved to a monthly profit distribution system in February, following a series of delays to its earlier quarterly payments. Before the firm moved to monthly payments, KWM had made just 25% of the payments it was due to make in the 2015-16 financial year. Payments always relate to the profit from the prior financial year.
In October 2015, Legal Week revealed that legacy SJ Berwin partners had seen their August quarterly profit distribution delayed. The firm paid out the complete first profit distribution relating to the 2014-15 financial year in December 2015, after a five-month delay.
Last month, 98% of the firm’s European partnership voted in favour of the recapitalisation of the firm, with partners committing in excess of £14m of additional capital. The firm has also asked salaried partners to contribute capital for the first time. Former partners told Legal Week that salaried partners had been asked to contribute around £60,000 each.
Ex-partners have expressed surprise at the most recent delay. One former partner said: “Considering they’ve just gone through a capital-raising process I’m slightly surprised that hasn’t unlocked the funds needed. It’s not painting a particularly positive picture.”
Two more partners departed the firm last month, with Covington & Burling hiring competition partner Elaine Whiteford and Norton Rose Fulbright picking up disputes partner Paul Stothard.
The exits are the latest in a raft of departures, including finance partner Jeremy Cross, who joined the London office of US firm Cadwalader Wickersham & Taft earlier this month. In April, Mishcon de Reya hired London intellectual property (IP) head David Rose, while IP partner Campbell Forsyth left for Dentons and commercial partner Gretchen Scott left to join Goodwin.
Some of the partner departures have come as a result of a restructuring of KWM’s UK arm, while others have voluntarily left the firm.
However, the firm recently moved to rebuild its Paris office with the hire of senior associate Guilain Hippolyte from White & Case. The arrival of private equity specialist Hippolyte, who is joining KWM as a partner, represents the firm’s first hire in Paris since the March departure of a highly regarded six-partner private equity team to Goodwin.