Thoroughbreds wary of leap over limited liability hurdle

Major law firms have responded cautiously to partnership legislation, writes Jeremy Fleming

The Limited Liability Partnerships Act 2000 is scheduled to come into force on 6 April - to coincide with the end of the financial year.

however, there are doubts that the likes of Companies House will be ready in time.

Nonetheless, law firms have been on notice for some time about its impending arrival, and the potential pros and cons of using the new business vehicle.

There is, however, no clear sign of how many will make the jump, at least before they see how others are coping with it.

Jeff Triggs, a partnership specialist at City firm Slaughter and May, says: 'I'm not sure that LLPs are quite the panacea that they're being touted as.

The largest firms are unlikely to take them up immediately.' Mr Triggs predicts that medium-sized firms may be the first to make the leap.

Tony Sacker, a partnerships expert at City firm Kingsley Napley, says that although many law firms 'keep their cards very close to their chests', it is more likely that the large accountancy firms will be the first to become LLPs.

The primary benefit of LLPs is, obviously, limited liability for the partners not involved in a claim.

Firms will have to balance their desire for this against the publicity requirements and corporate restructuring demanded by the Act.

'Ultimately,' says Mr Sacker, 'accountancy firms have larger professional negligence claims and it's therefore more worthwhile for them to become LLPs.' If the larger firms are backward in coming forward, what of smaller practices? Tony Twemlow, a partnerships lawyer at Liverpool firm Cuff Roberts and former president of Liverpool Law Society, says some smaller firms may be tempted into becoming LLPs, not because of the chances that the vehicle will give their businesses, but as a means of damage limitation.

He explains: 'Here in the north- west many smaller firms are genuinely worried that they could go bust following the legal aid reforms.

It could be that firms which fall into this category look to LLPs as a means of protecting partners against the worst.' One area of interest is the effect that LLPs will have on the insurance of partnerships.

Practitioners will be watching to see whether some partnerships - especially smaller ones - underwrite themselves for less as LLPs than they did as partnerships.

Whether or not firms opt to become LLPs, the legal world will certainly be changed next year by what Mr Sacker describes as 'the arrival of a new animal'.

He says that across all departments of all firms, lawyers must acquaint themselves with this new animal: how to sue it; how to contract with it; how it is taxed; how it is run.

LLPs will be a major player on the legal landscape of 2001.