Clifford Chance, the world’s largest law firm, is seeking an average of £100,000 from each of its 400 equity partners to raise more than £40 million for the firm.
The capital call, approved by special vote, is the most dramatic sign yet of the measures that leading law firms are taking to secure their financial position as they prepare for a sharp decline in revenues.
Individual partners, whose share of profits ranged from £528,000 to £1.3 million last year, according to Legal Business, the trade publication, may have to borrow to fund their contributions, which will depend on seniority.
The move came as the firm announced that it was in redundancy talks that could lead to as many as 80 junior lawyers losing their jobs. Clifford Chance, which has a staff of 1,000 in London, is the first of the “magic circle” firms in the UK to announce such consultations.
Stephen Purse, the finance director, said that the two announcements were unrelated and that the capital call was a routine measure to ensure that the firm had enough cash to fund continued growth. It called on partners to inject funds in May 2006.
“It’s a perfectly normal thing to do,” Mr Purse said. “Every business, as it grows, reassesses its level of capital from time to time.” He denied that Clifford Chance was experiencing cashflow difficulties but declined to elaborate on the firm’s financial position. According to published accounts, it had net cash of £71.8 million at the end of 2007-08.
Other leading firms contacted by The Times said that they had no plans to ask partners for additional capital contributions, although many declined to comment.
Jeremy Sandelson, London managing partner for Clifford Chance, said that the redundancy announcement was prompted by prevailing market conditions. However, rumours that Clifford Chance has suffered more than its rivals from the investment banking crunch have circulated for months and this move is likely to feed speculation further.
Trainee solicitors and partners would be excluded from redundancy. “We haven’t taken this decision lightly,” Mr Sandelson said.
Clifford Chance, which generated revenue of £1.3 billion last year — a record for a law firm — has a dominant banking and finance practice that includes Citigroup and Goldman Sachs among its biggest clients. However, the firm largely missed out on the high-profile restructuring mandates that emerged during the financial crisis. Those went to rivals such as Slaughter and May, Linklaters and Freshfields Bruckhaus Deringer.