London-based Hodges Jones & Allen has become the first-ever wholly employee-owned UK law firm following a change in its ownership structure as founding partner Patrick Allen continues to plan his succession. Allen, (pictured) who stepped down as managing partner last year in favour of Vidisha Josh, has accumulated 70% of shares in the firm over his time there and there were concerns that his eventual retirement would trigger a huge loss of capital for the firm.
Keen to avoid breaking up the firm into different sellable parts, and not tempted by a merger, Allen and the rest of management set up an employee ownership trust (EOT), which will manage the firm’s profits and shares on behalf of employees with bonuses dependent on profit performance.
Allen and Joshi will act as trustees while finance director and business consultant Kingsley Tedder of Coach House Consultancy will act as an independent external trustee for corporate governance and compliance. As part of this novel structure, all 230 employees will be entitled to annual tax-free distributions of up to £3,600 per year.
EOTs were introduced by the Finance Act 2014 as part of government initiatives to promote employee ownership models. No law firm before Hodge Jones & Allen had switched to such a model, however several firms have stopped just short; Signature Litigation operates under a co-operative structure whereby every firm member has a fixed, non-discretionary and proportionate entitlement to firm profits while both Stephens Scown and listed firm Gateley plc provide employees with minority stakes through trusts.