In name and in fact: measuring the extent of partners' responsibilities

In my experience, the ambition of most prospective solicitors is to become a partner, either as the pinnacle of their career or as a stepping-stone to a political or judicial career. It is, sadly, an all too regular occurrence that solicitors accept the mantle of “partner” without undertaking a proper investigation into what that means and what they could be letting themselves in for.

At the risk of teaching Grandmother to suck eggs, accepting an offer of partnership is not merely a change in title. It carries quite heavy responsibilities and there may be very serious consequences arising from a failure to meet those responsibilities.

I would like to think that most solicitors would conduct a proper due diligence exercise both before signing on the dotted line and during their tenure as partners. The reality of practice though is that many don’t. Either they trust the people they have been working with and assume that all is in order, or they don’t fully understand what checks they should be doing.

Shaky ground

I have written before about the perfect storm the legal profession has been facing. While some of the storm clouds on the horizon may be abating, it is right to say that the outlook for those with disciplinary records (however undeserved in a strict moral sense) are on increasingly shaky ground in light of the publication of decisions and hardening attitudes of the SRA, professional indemnity insurers, lenders and accreditation schemes. While it is no longer the case that those with disciplinary records have necessarily personally fallen below the standards expected of them, it remains the case that a disciplinary record can be a serious career impediment. So what steps should prospective partners consider before
signing up?

In my view, the very first question one should ask is: why me? Do you understand the reasons why you’re being asked to be a partner? Are you satisfied that it is a genuine arrangement? Are you qualified to undertake the role? It may sound obvious but more than one solicitor has been left to bear the fallout of dishonesty, fraud or simple mismanagement as a result of accepting a partnership without asking questions.

Whenever you undertake a due diligence exercise, there are judgements to be made as to the extent of the exercise. However, in my estimation there are three key areas that a prospective partner needs to understand and investigate before agreeing to take on that responsibility: compliance, status and potential civil liability.

Status involves consideration of the form of partnership and your employment status. Will you be a self-employed partner, member of an LLP or perhaps a director of a limited company? Will you still have a salary or take drawings; how will these changes affect your personal finances, taxation and employment rights? Will you have to buy an equity share?