No matter how “green the shoots” of the recovery, it appears that partner and team moves have picked up in recent months, particularly in the legal sector; and one can reasonably expect more moves to follow as confidence returns to the market and disgruntled partners seek new homes.

Before letting partners head for the door, the firm’s management should look carefully at their LLP members’ agreements or partnership agreements to see what contractual terms apply.  A well drafted document will be of great benefit to the firm. It is certainly not the time to find there is no written agreement or you have a poorly drafted document.

The first thing to check is the applicable notice period and also the whether the retirement will only take effect from certain points in the year such as the end of the firm’s financial year.  Some firms took the step of including provisions in their agreements to create a “waiting room” which limits the number of resignations in a given period and that should not be overlooked.

Secondly, management should consider whether they wish to invoke any garden leave provision or, conversely, think about letting the partner leave on short notice.  It is always important to check who can make the decision to invoke a garden leave provision – is it the managing partner or management board or does it require a vote of the partners?  A garden leave provision must be expressly set out in the LLP membership agreement or partnership agreement otherwise the right will not exist. 

Typically, the retiring partner will be subject to restrictive covenants by virtue of the LLP or partnership agreement. One would expect there to be restrictions on soliciting staff and clients and, possibly, a non-acting clause.  Check whether any carve-outs were agreed in relation to the clients he or she introduced when the partner joined the firm.  There may be restrictions on partners working together in the same firm for a period after leaving.

Any retiring partner will doubtless be interested in when capital is to be repaid as well as undrawn profits.  It is possible that the firm will be under an obligation to repay capital direct to the bank which provided a loan to fund it in the first place.  Failure to pay an instalment may trigger a liability to repay all the capital so diarise payment dates.

Often there will be a discussion on the actual terms of retirement which may result in a bespoke retirement deed, particularly in situations where a number of partners are leaving to join the same firm.

Finally, if teams seek to move or multiple partners retire at about the same time and are heading for the same new home, consider whether there may have been a breach of duty by one or more of the individuals – it could give the firm significant power in any negotiations with the individuals and their proposed new firm.

For more information on these issues please contact

Clive Greenwood

or your usual Lewis Silkin contact