FIRMS MOVE at different speeds for different reasons.
Take Wilkins Kennedy which earlier this month changed its structure from a partnership to a Limited Liability Partnership (LLP) 12 years after it was created. Ernst & Young were the first to make the leap to LLP status back in 2001, now three in five firms in Accountancy Age’s Top 50 survey is an LLP.
For a firm that boasts a 130-year legacy, perhaps it’s apt it didn’t rush the conversion.
Managing partner David Fenn, who joined the firm in 1971, admits he “wasn’t totally convinced” about making the move initially.
But, helping the firm grow to 12 offices, and overseeing a move to a more regional approach where all accounting and finance disciplines can be supplied to any office, change is not something the firm is shy about.
The only thing Fenn shies away from is management-speak. He is open about the reasons for the conversion from its old partnership model to LLP status – proving attractive to potential partners.
“We’d had loads of discussions…internally, and with merger targets, and they’ve asked us why we’re an old partnership and not an LLP like most of our competitors,” says Fenn.
The key issue is risk management. While Wilkins Kennedy has what Fenn describes as a “fantastic claims record” and a high level of PI cover, there is always that small risk of a potential claim against the partnership.
With the firm in growth mode, more partners and bigger clients means that that small risk grows. The protection the LLP structure affords for partners has proved too important to avoid.
“People we’ve talked to have said they’d prefer to be an LLP, because while they know their capital is at risk their house wouldn’t be,” explains Fenn.
“For the younger partners and the high calibre people we’re after, we’ve got to look at how they view business today – and they want their risk left to a minimum. Times have changed from when I was first a partner.”
The process for moving to LLP took the firm two and a half years.
It began at a partner conference in July 2010 which saw partners agree to look into the issue further. This was ratified a year later.
Fenn organised a sub-committee, headed by former managing partner and restructuring expert Colin Wiseman, to manage the project. Fellow partner Sarah Hannaford was involved in compliance affairs as it progressed.
The project effectively took nine months from September 2011, from setting up a beauty parade of lawyers to manage legal affairs through to the conversion.
But rather than being a rigmarole, a corporate structure switch to help the firm better market itself, Fenn believes Wilkins has learned valuable lessons from the project.
The switch reinforced to Fenn and his team the importance of keeping everyone in the loop on its progress. Staff and partners’ views were sought throughout the project, particularly where some members would have been particularly affected by the change.
Another key benefit gleaned by Fenn was that of keeping partnership, or membership, agreements up to date. The firm’s old partnership agreement was penned in 2009.
“As you grow, lots of things within the agreement need to be updated. You make new rules within the partnership and need to clarify certain wordings within the agreement.
The switch gave the firm the opportunity to get its agreement up to scratch. “Things had changed around profit sharing, committee structures, proxy voting, lots of things,” says Fenn.
“Things get decided at partners’ meetings, recorded within the minutes, but not bound in ‘statute’ as such, within the formal agreement. It is worth updating the partnership agreement on a regular basis.”
The cost to the firm of the process? Legal fees of course, and changes to stationary and marketing material, but the time and effort put in was “substantial”, he admits.
But for Wilkins Kennedy, which achieved 100% of partners in favour of the move, those costs should be well outweighed by the benefits.
The firm should be more attractive, with internal governance up to date. Banks, Fenn says, like and understand the LLP structure.
“It’s been a hard but worthwhile exercise,” Fenn adds.
Practice: Wilkins Kennedy
Offices: 12, across the south and south-east
Fee income: £28m
Top 50+50 ranking: 21
Sources: Accountancy Age and Wilkins Kennedy
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