Clifford Chance partners are thousands of pounds better off a year thanks to the firm's new global cash management system, The Lawyer can reveal.
The firm has put in place a groundbreaking £150m long-term revolving loan facility from Barclays and Citibank for capital purposes, which has replaced individual partner contributions.
Currently, Clifford Chance partners' individual capital contributions are pegged to their position on the lockstep. The contribution equates to some £2,500 per point on the lockstep, with entry level partners at 40 points and plateau partners at 100 points, meaning that capital contributions vary from £100,000-£250,000 according to seniority.
In the normal course of events, the firm – in common with most other law firms – will arrange individual loans for the partners with a bank of its choice. But because Clifford Chance partners now no longer have to pay off the individual interest on these loans – as the firm is borrowing at a lower interest rate directly from the bank – a plateau partner will be some £14,000 better off per year. Plateau partners last year earned £855,000, according to The Lawyer 100.
Confirming the arrangements, London managing partner Peter Charlton said: “It's just simpler for the firm now to borrow the [whole] amount under one facility.”
The move is part of a shake-up of Clifford Chance's entire global cash management process, spearheaded by finance director Chris Merry. The deal with the firm's two lenders also includes a multicurrency overdraft facility. The initiative also consolidates the firm's relationship with Barclays, which it currently bills approximately £6m a year, and Citibank, one of the firm's largest clients, which is responsible for some £12m of billings.
Clifford Chance's move underlines the growing corporatisation of law firm structures. As revealed by The Lawyer in December, Withers was the first top 100 firm to transform itself into a UK limited-liability partnership (LLP) (The Lawyer, 10 December 2001).
Some of the impetus for the change in Clifford Chance's financial arrangements came from the firm's status as a US LLP.
Charlton said: “The LLP made it slightly easier. Because an LLP is a legal entity, it makes it easier to enter into corporate-type arrangements.”
However, Charlton dismissed any suggestion that one was contingent upon the other. “We could have quite easily had the same partnership capital funding without [an LLP],” he said.
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