CC withholds partners' profit share as overheads escalate

Clifford Chance partners could be facing a leaner Christmas as the firm debates whether to pay or delay on two chunks of profits before the year-end.

Clifford Chance has held back its October income distribution, the second time this financial year it has stopped a quarterly profit payment after The Lawyer revealed that the July payout had been halted (The Lawyer, 28 July).

Management will now have to decide whether to release a percentage of the owed profits before the year-end and spread the remaining income over 12 monthly instalments in 2004; or it could defer the whole lot until the next calendar year.

As well as the knock-on effect of the slowdown on client payments, Clifford Chance has been hit with a succession of extra costs in recent months, including the move to Canary Wharf, its imminent New York relocation and a new IT system.

The quarterly profits pay-outs, released around January, April, July and October, are on top of monthly drawings. The system was introduced just four years ago, before the US and German mergers, as a means of closely aligning profits to performance.

Prior to this, partners were paid their share of the profits after 20 months.

This included the financial year ended 31 April and an additional eight months until December, when Clifford Chance's accounts were finalised. Partners would then be paid profits over 12 months starting in January.

Although rejigged, the system was flexible enough to revert back to a 12-month one as opposed to quarterly distribution.

Clifford Chance was unavailable for comment.