Accountants rush to limit liability

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The Independent Online
More than half of professional partnerships, mainly lawyers and accountants, are considering ways of limiting their liability and a similar proportion believe they may become limited liability partnerships, according to a survey published by accountants Smith & Williamson.

The findings come as Jersey finalises legislation, drafted with the aid of leading accountants Price Waterhouse and Ernst & Young, to enable large firms to provide their partners with better protection against lawsuits by registering on the island.

Other offshore financial centres, such as Guernsey and the Isle of Man, are understood to be looking at similar moves.

The problem of increasingly large negligence claims has mainly been associated with accountancy firms, which have been hit by investors damaged by the spate of corporate collapses of the early 1990s.

But the survey by Smith & Williamson, whose staff wrote the recently published Professional Partnership Handbook, finds that solicitors are increasingly worried by the issue, with 38 per cent considering ways of limiting liability. Some 48 per cent of them thought the limited liability partnership route was possible, while 29 per cent felt the same about incorporation - the approach already adopted by accountants KPMG's audit arm.

The same survey, conducted in September, shows that 80 per cent of solicitors' firms, which made up 60 per cent of the survey sample, would consider a merger, while 75 per cent have either made an approach to or been approached by another firm to discuss a merger or the acquisition of a team.

About 62 per cent of law partnerships believe that mergers and acquisitions will increase over the next 12 months.

While 16 per cent are actively considering a merger, 34 per cent are actively looking at acquiring a team.

Simon Mabey, chairman of Smith & Williamson's professional partnership group, said: "This year's survey provides evidence that limited liability is an issue that professional partnerships are unable to ignore. It also indicates that in the next 12 months the legal landscape will continue to change through further mergers and acquisitions."