Lexpert Magazine

LEXPERT MAGAZINE | MARCH 2017 49 | SWISS VEREINS | firms, can also give rise to disadvantages, such as difficulties in achieving consistency in standards, systems, cultures, structures, contributions and brand understanding and support, and getting there in a verein structure requires very good leadership, management and active and ongoing in- volvement from both sides," Larkan says. "e so-called cultural glue and loyalty that sometimes keeps mobile partners in an integrated firm is not present to the same extent in a verein, particularly where finan- cial and other structural issues arise." ese are difficulties, however, that can be overcome with the correct strategy, as exemplified by the success of the Big Four accounting firms: although they pioneered Swiss vereins, most of them no longer in- habit that structure — but the fact remains that none of them is or has ever been a single profit-sharing pool. As Brad Hil- debrandt and Lisa Rohrer put it in Hildeb- randt Baker Robbins' Law Vision Blog: "At the end of the day, the financial details of integration behind a merger are much less important than the ability of the global firm management to effectively execute the strategic rationale of the union." As it turns out, a survey conducted by Legal Week in January, about the time the firm formally went into administration, found that 55 per cent of the more than 100 former KWM Europe partners who responded blamed local leadership both before and aer the merger as being "most responsible" for the collapse; 45 per cent cited partner "self-interest." Indeed, Dentons' Joe Andrew has point- ed out "that there are as many types of vereins as there are organizations who use that structure," with many bearing "little resemblance" to each other. e Dentons verein, for example, has a number of agree- ments that, in Andrew's words, "bind us to each other as firms and to the verein." And as Christopher Pinnington, Dentons Can- ada's Chief Executive Officer saw it when interviewed earlier by Lexpert, "What re- ally counts is strength of leadership and the alignment of culture, vision, values and strategy throughout the firm." Still, Richard Godden of Linklaters in London, who has been an advisor on a host of major law and accounting firm combina- tions that have taken many different forms, ranging from loose associations to vereins to full-blown mergers, says that fully inte- grated firms have a leg up when it comes to seamlessness and unity. "I won't go as far as to say that a verein can't be as seamless as a unified firm, but if you're trying to be seamless and doing it through a network or a verein, you start 30-love down," he says. "At the same time, just because you're an in- tegrated firm doesn't mean that your struc- ture alone ensures seamlessness." Godden cautions law firms looking for associations or combinations not to focus primarily on structure. "Commercial re- quirements precede structure, although a number of clients seem to think it's the other way around," he says. "ere are an infinite variety of things that lawyers and accountants may be trying to achieve. I ask them to tell me what they want to achieve, and then I advise them as to the most ap- propriate structure." To be sure, law firms of all shapes and sizes have failed. It's probably unfair to foist the blame for KWM's misfortunates on their choice of the Swiss verein as a firm structure. But it's not unfair to post KWM's failure as a warning beacon point- ing to the verein's hidden dangers. Julius Melnitzer is a freelance legal-affairs writer in Toronto. IN WHAT MAY be a sign that Swiss vereins have passed their heyday, Gowling Lafleur Henderson LLP chose a different structure when it combined in February 2016 with UK-based international firm Wragge Lawrence Graham & Co. to form Gowling WLG. There's also been a trend away from Swiss vereins among the Big Four accounting firms, previously its strongest proponents but now all structured otherwise: Deloitte Touche Tomatsu Ltd. had been legally organized as a Swiss verein for many years before it became a company limited by guarantee (CLG) in 2010; Ernst & Young Global Ltd. is also a CLG; KPMG International Cooperative abandoned its verein status in 2003 in favour of a Swiss cooperative structure; and PricewaterhouseCoopers International Ltd. is a limited liability partnership (LLP). Gowling WLG established itself as a CLG under UK law. From a business point of view, the CLG resembles the verein in the sense that Gowling WLG embraces two separate partnerships and discrete profit pools. Each partnership is a member of the company as a guarantor rather than a shareholder. "In Canadian terms, the CLG most closely resembles a not- for-profit corporation without share capital," says Michael Herman of Toronto, General Counsel at Gowling WLG. Richard Godden of Linklaters in London, who advised on the merger, opened Gowlings' eyes to the CLG. "The advice we got was that Swiss vereins were never designed to be used by global professional services firms," says Peter Lukasiewicz, Gowling WLG's Toronto-based CEO. "Another difficulty was that Swiss law gives very little guidance as to how vereins should operate and be governed." By contrast, UK mandates a detailed structure and governance regime for CLGs. "That appealed to us because it made for more business certainty in a jurisdiction with which we were familiar," Lukasiewicz says. "And from what I've read, the King Wood Mallesons affair would have produced a substantially different outcome if KWM had been a CLG instead of a verein." AN ALTERNATIVE PATH WHEN GOWLINGS MERGED WITH WRAGGE LAWRENCE GRAHAM, THE FIRM DECIDED AGAINST A SWISS VEREIN STRUCTURE

• Cover
• front
• Big
• back