Fox & Partners were proud to sponsor last week’s Association of Partnership Practitioners Annual Dinner at Goldsmiths’ Hall.
Highlights included Catriona Watt’s speech, which we are pleased to share below.
Reflections On What It Means To Be In Partnership
Thank you to the Committee and to the APP for the opportunity to sponsor this wonderfully well-attended dinner this year.
The Development of Partnership Law
The APP has always been a hugely important organisation throughout the life of our firm, Fox & Partners; as many of you will know, the founder of our firm, Ronnie Fox, helped to establish the APP 21 years ago with the aim of seeking recognition for partnership law and practice as a separate area of specialist expertise. That objective was achieved within a couple of years and from the legal perspective, Chambers and The Legal 500 soon began to devote separate sections to the subject of partnership law. Those sections continue to grow apace each year. Along the way, the APP has made a significant contribution to the law and played an active part in the development of the Limited Liability Partnerships Act 2000 and the regulations made under that Act. Fast forward to 2019 with a 300+ strong membership across a variety of disciplines.
The Influence of the Association of Partnership Practitioners
The tireless work of the Committee ensures that sessions and workshops take into account what are truly relevant, useful and interesting topics for partnership practitioners and provide a forum within which to share ideas and experiences, along with a focus on encouraging a younger and more diverse membership. For our firm the APP has been about friendship, support and learning from each other, and building a network of the most specialist partnership advisers in the country. When our firm went through a major change nearly 2 years ago now, with the transition of Fox to Fox & Partners Solicitors LLP with myself and 2 colleagues taking ownership with Ronnie’s support, the backing we received from friends within the APP was invaluable and we are extremely grateful.
Recent Developments in Partnerships
As partnership practitioners focusing on the, primarily City based, Financial Services and Professional Services sectors we enter the next few weeks and beyond with some trepidation………..but also reflecting on and looking back at a year of interesting developments and challenges in the partnership space.
Despite previous changes in tax legislation, in our experience the LLP remains the structure of choice for many professional and, increasingly, financial services and Fintech partnerships, not least for the privacy and flexibility it affords parties. Partnership disputes are typically fraught with high stakes for all parties but we are reminded by the work we do on a regular basis that they are rarely insurmountable and we continue to support firms and individuals to find solutions to even the most acrimonious disputes.
2017 saw a significant decline in partnership disputes heard in the High Court, down 20% from the number of disputes in 2016. Disputes between partners typically arise when there is financial stress and therefore disagreement about how lower profit shares are shared out, or over any capital contributions that might be required. So we may find that Brexit disruption could cause a future uptick in disputes going all the way to trial in the same way as was seen in 2009 in the aftermath of the financial crisis, when partnership disputes heard in the High Court were at their highest. But maybe not – partners and firms have a long track record of looking at litigation as a last resort and have often favoured a less public forum, with arbitration clauses more common in many agreements in any event.
Case law continues to add pressure on the fetters which affect discretionary decision making within firms. This has shaken the shield which traditionally protected firms from challenge. The case of Braganza – the extraordinary case around a decision which rendered a widow without financial support following a determination by a major oil company that her husband had committed suicide – and the ripples it has created has resulted in pressure for more transparency around decision-making and decision-making processes in partnerships/LLPs than in previous years.
The Impact of #MeToo
The reflection on the last year would not be complete without mention of #metoo and its impact on professional and financial services. We have undoubtedly seen a shift in culture towards speaking up which has influenced behaviours of partners, particularly women and other minority groups, in terms of calling out discrimination and harassment. This awakening has been supported by the pressure for transparency and personal accountability and, together with an increased availability of creative funding solutions and potential for group litigation, is starting to chip away at the structural barriers which may have historically prevented a challenge to the gender pay gap and discrimination. We may see more challenge as time goes on.
What Does The Future Hold?
So as we look forward, is the partnership model fit for fostering diversity and inclusion? With less than 10 per cent of the people occupying the highest paid positions in financial services partnerships being women, the figures tend to suggest that either men are paid more for doing similar work or there are significant barriers or discrimination preventing women reaching the most senior positions in their organisations. This is a problem for society as a whole and organisations must look at their practices and ensure potential barriers around flexibility, childcare and thinking outside the box when it comes to hiring are eroded. There is clear space for partnerships to provide leadership on these issues.
This year has also seen the rise of the regulators, keen to flex their muscles and to ensure in the highly regulated environment in which partners typically operate, that they are seen to be monitoring progress of their requirements and sharing their expectations. For example, we have seen the FCA’s review of firm’s whistleblowing arrangements and the SRA’s warning notice on the use of non-disclosure agreements. With the Government’s announcement last week around its proposals to exercise much greater control over the use of non-disclosure agreements, a whole other layer of ethical and regulatory consideration needs to be taken into account, both when advising clients and in our own firms.
What Does This All Mean For Partnerships Going Forward?
Advising firms and partners on a regular basis on all of these issues along with the recent succession of our own practice has found us often reflecting on what it really means to be a partner in 2019.
Inevitably, in many ways the concept of partnership is changing. Many professionals today derive the bulk of their job satisfaction from performing their professional work and feeling adequately remunerated. Those who work for professional firms which are listed, or which are controlled by private equity interests, or which are truly global organisations, are likely to view partnership as a very different beast to partners in much smaller firms with real control over the direction and management of the firm. But in our experience, from looking at the issues that arise time and again within partnerships, it still feels like there are professional people who truly want a significant financial stake in the business for which they are working, a voice in the management of that business, input in the cultural and strategic direction of the firm and a relationship with their colleagues which is personal, social and commercial. It is that feeling of being invested; financially, emotionally, reputationally, which seems to prevail throughout so many of the matters we advise on and which we think means there will always be a place for those who wish to carry on a business in common with a view to profit.
Thank you to the APP for this opportunity and have a wonderful evening everyone.