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Bacon & Woodrow may limit liability

Peter Rodgers
Tuesday 03 December 1996 00:02 GMT
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Bacon & Woodrow, the actuarial firm, is joining the large number of accountancy and other professional organisations which are looking at whether to drop their unlimited partnership status.

Following a weekend meeting of partners at which incorporation or a switch to a limited partnership in Jersey were among the options under discussion, Duncan Ferguson, senior partner, said: "I am sure we will limit our liability in due course."

Bacon & Woodrow, which has 45 partners and more than 1,000 staff, was prompted to search for ways of ending its unlimited liability partnership status by the shock of having to fight a pounds 400m lawsuit. It is the threat of enormous actions for damages that has persuaded most of the accountancy firms to look for new limited ownership structures.

The lawsuit against Bacon & Woodrow was brought by NRG, the reinsurance subsidiary of ING, the Dutch banking group. Mr Ferguson said: "We had never been sued in 70 years until we had this rather large case."

NRG failed in its High Court attempt to obtain damages from Bacon & Woodrow and the accountants Ernst & Young over the reinsurers' acquisition of Victory Reinsurance from Legal & General in 1990.

But Mr Ferguson confirmed the pressures of the case - which could have cost each partner millions if it had lost - had prompted the rethink about partnership status.

Mr Ferguson said a decision would not be taken until the confused legal and tax picture of limited liability partnerships was resolved and so a decision had been deferred.

The firm would not make the move in 1997, and because of the confusion it had decided to be a follower rather than a leader.

Jersey recently changed its laws to encourage UK partnerships to switch to the island. The British government has promised an on-shore equivalent to persuade them not to go, but the Inland Revenue has created a serious obstacle by threatening to tax limited partnerships as if they were incorporated.

A survey by Smith & Williamson group found that more than half of partnerships in the professions were considering limiting partners' liability. The sample of 90 firms included solicitors and surveyors.

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