Biglaw, Money, Partner Issues

Uh-Oh! Why Is This Biglaw Firm Deferring Partner Profits?

This firm may not be out of the woods just yet...

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bonus money low bonuses poor empty pockets sad upset lawyer businessmanWe looked at cash collections… the recapitalization process, the tax, and the cash flow of the firm… and we think the prudent thing to do is to defer the distribution.

It’s not unusual. We look at the cash needs of the EUME business on a month-by-month basis and defer partner profit distributions if needs be, this has happened a small number of times this year. But we want to be making those distributions every month by having the working capital position of the firm and our cash flow management where they need to be — that’s what we’re addressing right now.

— Stuart Fuller, managing partner of 2,000-lawyer firm King & Wood Mallesons, explaining why profits were not being disbursed to partners, despite the fact that partners were recently asked to contribute $18.4 million to the firm in a capital call. Fuller says that capital infusion won’t be paid until summer’s end, and the firm needed to pay U.K. partners’ taxes in July. Partners are still receiving their monthly draws.

When asked if this would be the last month that partners’ profits would be deferred, Fuller said, “We are being very conservative with our working capital. We made that communication with our current partners… They have the entitlement to get that profit.”

Staci Zaretsky is an editor at Above the Law. Feel free to email her with any tips, questions, or comments. Follow her on Twitter or connect with her on LinkedIn.

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