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Incoming Halliwells staff ringfenced into sub-LLPs to protect against potential claims from legacy clients
Barlow Lyde & Gilbert (BLG) and HBJ Gateley Wareing have ringfenced former Halliwells staff in separate LLPs in a bid to limit their respective liabilities.
BLG and HBJ, which between them are taking over the majority of the assets of the failed firm, including 463 members of staff, wanted to hive off the incoming business because of the speed with which the deals were done. Separate LLPs would allow the acquiring firms to avoid beingdeemed liable for claims against Halliwells as successor practices.
Halliwells filed notice of intention to appoint an administrator on 24 June and the deals were completed by 20 July.
CEO at BLG David Jabbari explained: “The new team will initially be housed in a subsidiary LLP of our main LLP. This was done simply as a derisking measure given the speed with which this transaction had to be completed.”
Joint senior partner at HBJ Mike Ward said: “We’ll collapse the two LLPs as soon as the business is stabilised and we can have conversations over a relatively relaxed timescale, which wasn’t possible when the deal was done.”
In both cases an initial period will apply in which incoming partners will not be expected to contribute capital and they will be remunerated on a different basis to existing partners.
Around seven of the 19 partners joining BLG will become fixed-share members, meaning they technically receive a fixed share of profits and contribute capital. However, as a result of their personal debt obligations, which are believed to total £10m according to Halliwells’ 2008-09 LLP accounts, the capital requirement will initially be waived. HBJ is imposing a 12-month moratorium.
It is understood that BLG will stand behind the capital loans that the partners bring with them. The firm has agreed with the partners a formula for a gradual repayment of the loans. HBJ will not be guaranteeing any outstanding obligations.
Hill Dickinson, which bought the Liverpool office and part of Sheffield, has not created a separate LLP. The firm had been in talks with Halliwells’ management to take over the entirety of the firm for several months prior to BLG and HBJ’s moves and had more time to undertake due diligence.
A Hill Dickinson spokesperson said the decision to absorb the 127 staff into the existing LLP was because the firm was “looking for integration into the business”. She would not comment on the capital requirements or remuneration of incoming partners, except to say that “the intricacies of the arrangements are confidential and the former Halliwells partners will be treated like any other partner in Hill Dickinson”.