LAW FIRMS Blake Dawson Waldron and Freehills have confirmed they are considering incorporation.
“We will look at incorporation for a whole host of reasons,” John Atkin, managing partner at Blake Dawson Waldron said at the Australian Financial Review Legal Reform Summit last week.
Freehills chief executive Gavin Bell has also stated that his firm may incorporate as early as next year, while Robert Milliner, chief executive partner at Mallesons Stephen Jaques has acknowledged the partnership business model may be under threat.
Atkin said incorporation was being considered in part because the partnership model was out-of-date.
“The partnership model is very unsophisticated. You have to pay the profits every year for tax reasons, which doesn’t encourage long-term investment or thinking,” he said.
Until recently, large national firms displayed little interest in incorporation as many states did not allow it. However, all states and territories except South Australia have now agreed to pass legislation allowing the incorporation of law firms.
Alex Glanfield, director-general of the New South Wales Attorney General’s Department told the summit this will prompt firms to revisit the issue.
“It remains to be seen how many of our national firms move towards incorporation once all jurisdictions have implemented the ILP provisions in the Model Bill. I suspect that most of those firms will decide that a corporate structure provides the kind of flexibility and certainty of corporate structure they have been seeking,” he said.
Incorporation will allow firms to offer financial incentives to employees such as shares — attractive to younger lawyers in particular who do not harbour partnership aspirations.
Incorporation is a prerequisite to listing on the stock exchange, however, the major law firms have not indicated they intend to float. Onerous public reporting requirements for listed companies are seen as a deterrent.
Slater & Gordon, however, made history on Monday by becoming the first law firm to list on the stock exchange.