Allen & Overy (A&O) is set to become the first magic circle firm to become a UK limited-liability partnership (LLP) when the new financial year takes effect on 1 May.
The LLP will cover all but four of the jurisdictions in which A&O has a presence. The exceptions are Hong Kong, Italy, Luxembourg and Spain.
The firm has received the go-ahead from the German authorities, which are now prepared to recognise the UK LLP as tax-transparent. As a result, there will be no adverse taxation for German partners.
The four jurisdictions not included in the LLP have been left out for tax and/or regulatory reasons. However, partner Richard Turnor, who managed the process at A&O, said the firm would look at bringing those offices into the partnership if and when regulation allowed it.
Turnor said the move would, in particular, provide protection for partners against exceptionally large claims. “It’s Armageddon protection, it’s not a complete panacea,” he said.
Magic circle rival Clifford Chance has had limited liability since its merger with Rogers & Wells, but it is a US rather than a UK LLP.
“The UK model is more robust [than the US LLP] in terms of liability,” Turnor explained.
The decision is still subject to a partner vote on 30 April (the night before the LLP goes live), but that is likely to be a mere formality.