Is offshore the place to be?

Accountancy firms are looking far and wide for protection from lawsuits. Roger Trapp reports

T his week, KPMG, Britain's second-largest accountancy firm, has done what would have been unthinkable only a few years ago. It has published full financial results, revealing not just fee income but profits and the earnings of key partners.

Senior partner Colin Sharman and his colleagues have gone to some effort to paint this as a goodwill exercise that goes beyond the legal obligations stemming from its decision to make its audit arm a company within the UK organisation. But it is really a direct result of developments in the battle against negligence suits.

As the UK firm with the largest audit business, it was natural that KPMG should take a lead in finding a way out of the difficulties flowing from the application of the law of joint and several liability. The accountancy profession wants this law reformed because under it auditors - because of the perception that their insurance cover makes them a worthwhile target - can find themselves bearing the whole cost of a corporate collapse even if only partly to blame. But though the US has recently become the latest country to adopt proportional liability and a Law Commission feasibility study on the issue commissioned by the Department of Trade and Industry is shortly to be published, the big firms feel they cannot afford to wait for action. The court judgment late last year against Binder Hamlyn, which - because it had only partial insurance cover - could result in about 100 partners of the firm, now part of Arthur Andersen, being bankrupted, has provided just the evidence they needed that desperate times call for desperate measures.

Days after the judgment, Ernst & Young and Price Waterhouse announced that they were working with the States of Jersey to introduce a law that would allow them to set up in the offshore financial centre as limited liability partnerships. The idea, according to PW senior partner Ian Brindle, is to provide the firm with protection against the type of lawsuit that would wipe it out while not sacrificing the sorts of things that partnerships hold dear - most notably the collegiate structure that remains despite efforts to make the largest firms more businesslike.

Squaring this particular circle will be one of the central themes of a conference on incorporation of professional practices being held at London's Cafe Royal next Thursday by IBC UK Conferences in association with accountants Clark Whitehill and solicitors Allen & Overy.

The fact that Allen & Overy is taking a central role in the debate demonstrates that this issue is rapidly moving beyond the confines of accountancy. Solicitors' firms are increasingly worried about the rising tide of litigation, while the Binder judgment sounded warnings bells for professionals, such as consulting engineers and architects, involved in the traditionally litigious construction industry.

There is little doubt that coming changes in the tax regime make partnerships less attractive business entities than they were. But, as Allen & Overy partner Richard Turner, and David Furst and Chris Greene, of Clark Whitehill, will demonstrate at the conference, there are still many factors to be considered and a lot of complications to be dealt with if the move is to have the desired effect.

In particular, opinion is sharply divided over the effectiveness of KPMG's partial incorporation. Mr Sharman maintains that legal opinion given to the firm states that it can ring-fence its audit business in such a way, but others have their doubts. One prominent partner at another firm believes partial incorporation is just a first step - adopted to ease the financial or administrative burden of changing status - towards total incorporation.

Similarly, not every member of the accountancy profession feels that setting up as a limited liability partnership offshore is the way forward. The plan is inspired by a similar development in the US state of Delaware, where all the leading US firms are now registered. Delaware has long encouraged companies to be based there through having its own approach to certain areas of commercial law while still being part of the US. Jersey does not fall into that category and more than one firm has expressed reservations about "running away" in this way.

Proponents of the Jersey plan say they have been forced into it because UK legislation only allows partners to have limited liability if they take one part in the running of the business.

KPMG claims that leading clients and financial institutions are supportive of its move on the grounds that it will not only assist them in remaining in business but will also, as a result of the required financial disclosure, give them a better idea of its soundness. But the decision earlier this month by the mighty investment bank Goldman Sachs not to abandon its partnership status, when it had been widely expected to, demonstrates that incorporation is still a long way short of being a straightforward issue inside and outside the organisations concerned.

It is perhaps significant of the need to handle it carefully that the lunchtime session at the IBC conference will be taken by Dale Fishburn, chairman of Fishburn Hedges, the PR and design consultancy that has advised Price Waterhouse on matters arising from the firm's involvement in the matter that makes it most interested in audit liability - the collapse of BCCI.

Details of the Incorporation of Professional Practices conference, at which the author will be a speaker, from Sarah Mobsby at IBC UK Conferences, 0171-637 4383.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
Lucerne’s Hotel Château Gütsch, one of the lots in our Homeless Veterans appeal charity auction
charity appeal
Arts and Entertainment
Tony Hughes (James Nesbitt) after his son Olly disappeared on a family holiday in France
tv
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Voices
Jimmy Mubenga died after being restrained on an aircraft by G4S escorts
voicesJonathan Cox: Tragedy of Jimmy Mubenga highlights lack of dignity shown to migrants
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

    $125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum