Think of a lawyer with sufficient experience, but doesn’t have the capital to start on his own. Under current rules, only lawyers with money (read generational wealth) who can start a law firm – there are exceptions, I agree, but generally…. If we had clearcut rules that allowed lawyers to get non-lawyer partners and spelt out rights and duties and set clear boundaries, it would open up the field a bit.

RPS isn’t the managing partner. Two years ago, SAN made him "Deputy Managing Partner" in the hope that the title would keep him quiet and stay. RPS is known for his GST law knowledge, but the gentleman does not have a single managerial bone in him. Also, he is well-known for his candour▮▮▮ don’t always appreciate.

I find the ELP situation fascinating for one specific reason. Legally, SAN is entitled to such share of profits as corresponds to his equity. Assuming he was never a big biller, he was given that equity and title for his initial investment in ELP 25 years ago. The law doesn’t require SAN to be the highest biller in the partnership to take home his share. However, economics plays out differently. If the highest billers feel that they are being shortchanged, they can talk with their feet, which they are doing now. Indian law does not provide for enforcement of any provision that says a partner in a law firm cannot quit and walk away.

If ELP were an LLP, would it have been any different, I wonder?

Imagine if Jia decides that she is tired of driving her JCB. Jia approaches a Big4 Accounting Firm (Big4 AF) and sells out to them. Her equity is bought by 4 CAs working for the Big4 AF, who also have law degrees. Before she quits, she ties up all her equity partners with penal clauses that will cause them to pay unaffordable amounts to Big4 AF if they leave on their own in the next five years. Before she quits, she also pays a decent chunk of money to her equity partners from out of the money she gets. Will this work? I think it will.

At ELP, SAN's billings went down after he started to focus on management of the firm. Someone had to do it. In the UK and USA, senior partners take turns to manage the law firm - usually the managing partner gets a term of 3 years. It is understood that during that period, the relevant partner's billings will take a hit. However, that partner won't have to pay a price for the same. Being a managing partner is prestigious and the MP is selected through an election in which all equity partners get to vote.

Probably C. Cyrus is cursing the day he decided to groom his Son as a private client lawyer. Son’s billings will never be high, not even as high as the lowest billing corporate lawyer. If Son were a genius, he would impress the hell out of his clients, who are founder and HNIs who run India’s economy, to whom private client services are given away (almost) as a freebie, but unfortunately …….

Senior Counsel Rohan Shah started ELP sometime in 1998-99 as a sole proprietorship and later converted it into a law firm in 2001. Three partners joined him, namely his friend Vikram Nankani and two younger lawyers (SAN and Sword) whose fathers were also lawyers (one a very wealthy rent control lawyer and the other a Senior Partner at Crawford Bayley). SAN and Sword bought their way into the partnership, since they hadn’t established themselves in their fields and the funds they brought in allowed ELP to grow and expand. Vikram Nankani was the first to leave, after he became a Senior Counsel. Then Rohan Shah left, for reasons that are disputed. SAN and Sword controlled a big majority of the equity and they managed ELP reasonably well for many years, though their individual billings were never very high and neither made a big mark in their specialisms. Indirect Tax has been the mainstay for ELP and they carry the rest of the firm.

Now that the Tax and Trade teams are leaving ELP to join Dhruva Advisors, what are the lessons for family-run firms, where currently the founding partners have full control and also have a good reputation and billings, but the succeeding generation might not have the same reputation and billings? For example, around 12 years ago, India’s then biggest and most prominent law firm split into two, and the two law firms formed as a result of that break-up are still Tier 1 firms. The Mumbai HQ firm is still very much under the control of one individual (who has a Persian first name and so let’s call him Cyrus). Cyrus has a son (Son) and a daughter (Daughter) and both are good lawyers, but unlikely to become leading legal luminaries in India’s crowded legal market. Cyrus is in his late sixties and after he retires, will other partners in the firm allow Son and Daughter to take home a big chunk of the bacon, even if they aren’t billing in proportion? Won’t the other partners just walk away, even if Clever Cyrus is likely to have embedded a number of poison pills in the firm’s partnership deed to prevent or at least discourage exactly that scenario? What do you all think?