Thoughts on ways to improve the management of professional services firms

Thursday, August 31, 2006

Corporatisation in the Australian Legal Sector

On 20 August 2006 Bruce MacEwen carried a short post on Adam Smith Esq entitled How Do Partners Fund Their Capital Contributions?

In that post he reported in part on a story from the "Roll On Friday" UK web site claiming that letters had gone out to all Courdert's former partners informing them that they would not be getting any of their capital back—which could represent a hit of as much as $350,000 for some partners. The earlier story of Courdet's collapse can be found here.

This story illustrates some of the risks associated with partnership structures. I was reminded of it by a discussion today with a colleague who suggested that these risks must inevitably drive the legal sector in Australia towards incorporation and corporatisation, a move facilitated by the development of a uniform national approach allowing for both incorporation and multidisciplinary partnerships. I suspect he is right, although the barriers are greater in law.

The structural challenges now facing the legal sector are in fact similar to those that have been experienced in other professional areas such as medicine and accounting. For that reason, I propose in the next few blog entries to look at the corporatisation experience across a number of professions and the challenge it poses for all professions and professionals.

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