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Eversheds red cards equity partners" />Eversheds has issued its equity partnership with 'red cards', allowing the firm to withhold up to two quarters' of drawings in a bid to tighten its lockup performance.
As revealed by The Lawyer (17 March), the firm introduced a scheme based on the Football Association rulebook that will see partners receive a yellow card if bills are not sent out in reasonable time. If partners still fail to bill they will get a second yellow and finally a red card, which will see an equity partner's drawings being withheld.
The firm's chief executive David Gray said he had issued the red card after a number of cash management targets had been missed.
Pointing out that Eversheds must ensure it maintains a strong capital base, Gray added that the firm was not willing to increase borrowings to pay partners when the partners themselves could do something about it by improving lockup.
While partners will continue to receive monthly drawings their larger quarterly share, due to be paid in November, will be withheld. It is likely that the February payment will also be withheld, but this is up for review.
The firm's current drawings arrangement sees equity partners receive half their annual profit share in the 12 months following the end of the financial year they were earned in. The balance is paid at quarterly intervals over the following year.
"Under the cards scheme, if a partner has a red card that quarter's balance simply will not be paid," said Gray.
Gray had originally brought in the red card system as a way to reduce Eversheds' lockup to double-digits from the professional average of 110 days.
The use of the red card scheme comes after the firm introduced cost-cutting measure including imposing travel restrictions (TheLawyer.com, 8 October) and starting a redundancy consultation that could see up to 33 lawyers axed (TheLawyer.com, 4 September).