LLPs - keeping the partnership culture


This year looks likely to be the year of the limited liability partnership (LLP). Recent figures suggest that almost one-third of the UK's top law firms will convert or are actively considering converting to LLP status within the next 12 months.



Perhaps the greatest concern to partners of many firms that are planning to convert is the fear that they will lose the culture of partnership, where all partners look out for each other. Once the collective responsibility of joint and several liability is swept away, will colleagues look the other way and let an erring partner sink without trace - safe in the knowledge that their personal wealth is safe?



The reality is likely to be far removed from that - professional practice management, mutual professional support and effective risk management procedures will remain at the forefront of the well-run legal practice.



Individual partners, or 'members' as they will now be titled, will continue to face unlimited liability for their own actions within an LLP. In addition, the firm's senior management is likely to remain in the firing-line as it will be deemed to have a supervisory responsibility over all members of the firm. Moreover, all members of a firm that has converted to LLP status will still face damaging repercussions if the practice is faced with a serious claim for negligence. The reality is that LLP status is a final defence, which will only have an effect when a firm has faced a claim so damaging that its insurance cover, assets and reputation have all been wiped out.



Risk management will continue to fulfil as important a role in an LLP as it does in a traditional partnership. Indeed in managing the transition from one model to the other, it could be argued that ensuring that risk management procedures are well established, respected and practised becomes even more important to guard against any complacency that may creep in following conversion.



Key procedures will be the same for an LLP as a traditional partnership. As ever, effective risk management is as much a culture and frame of mind as it is set of carefully crafted procedures. However, ensure that the basics are in place - any number of professional liability claims could be avoided if firms ensured that their basic procedures were effectively implemented. Above all, make sure that engagement letters are accurately completed for every client; ensure that diary dates and deadlines are checked and met and make sure that all files benefit from periodic peer review. Learn when to say no to clients if they are asking for work for which the practice is ill-suited, or if the deadlines are too demanding or the source of funds opaque.



This column was prepared by AFP Consulting, a Division of Alexander Forbes Risk Services UK Ltd