Stewarts Law has established a corporate investment vehicle to allow its equity partners to invest in litigation in a tax-efficient manner.
The litigation boutique has long funded a selection of cases on a conditional-fee arrangement (CFA) basis but, anticipating major reforms to the CFA system, the firm has established SL Equity Partners to allow investments to be made in a structured way.
Managing partner John Cahill explained that the corporate entity has been admitted to the firm’s LLP as a corporate partner to support a growth in demand for litigation funding.
“In the post-Jackson environment there’ll be a greater requirement for firms to offer contingency-fee deals to clients,” he said.
Equity partners will be able to invest in cases and will get a return from successful cases or those that have settled at a favourable position.
Cahill said that in setting up a corporate limited entity partners will halve the amount they are taxed from 52 per cent on an individual level to 26 per cent as a corporate.
“It’s an incredibly sensible way to prepare for the changes, the firm needs the cashflow to meet the demands of our clients,” Cahilll said.
The firm, he added, had proportionately low debt levels and had not wanted to take external funds – either from a bank or private investor – to fund cases, preferring to keep debt at a “manageable level”.
The firm is predicting double-digit revenue growth over the next 12 months, with its commercial litigation practice, headed by partner Clive Zietman, expected to do particularly well. The forecast comes on the back of a strong 2011-12 for the firm.
Turnover improved by 22 per cent from £28.5m to £34.9m, while net profit grew by 29.2 per cent from £12m to £15.5m.
Average profit per equity partner, however, was down slightly on last year – from £926,000 to £890,000 – but still remains high in comparison to Herbert Smith’s at £840,000 (25 June 2012) and Ashurst’s at £740,000 (4 July 2012). Stewarts added five partners to the equity in the last year, bringing the total to 18.