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Legacy Herbert Smith has issued a cash call of up to £20m to all equity partners in an effort to boost its capital structure as part of the firm’s planned financial integration with Australia’s Freehills.
Around 170 equity partners at the firm will be affected by the move, with those in the equity asked to contribute £2,000 per equity point.
Herbert Smith’s lockstep ladder runs from 43 to 100, meaning that those at the top of equity – thought to be around 65 – have been asked to contribute £200,000 each. Combined those at the top of equity will put £13m into the cash pot with the remain £7m coming from those down the ladder.
According to various sources a memo was sent out to equity partners informing them of the cash call a number of weeks ago. The firm has arranged a bank facility for partners involved but declined to name which one.
The firm declined to comment on the amount but confirmed the cash call.
The arrangement was contained in the £800m merger agreement with Australia’s Freehills when the deal was agreed (28 June 2012). The new capital structure will apply only to legacy Herbert Smith equity partners and not to their counterparts at Freehills.
Neither salaried nor fixed share partners have been asked to pay into the firm.
In September Ashurst also asked equity partners to pay capital into the firm for the first time as part of a financial rejig aimed at bringing its practices into line with its Australian operations following the merger with Blake Dawson (10 September 2012).
Partners at the firm now input an amount every autumn calculated based on the number of equity points they hold, meaning laterals will now have to invest in the firm when they join.
SJ Berwin launched a consultation with partners about the firm’s capital structure in a process that could lead to it altering its capital requirements from members in March (4 March 2013).
The City firm said the review was an ongoing process of consultation with partners related to financial matters, with no decisions thought to have been taken.