16 Jul 2012

Firm launches investment scheme to fund litigation

A London-headquartered niche litigation practice has launched a process to make it easier for its partners to invest in litigation.

Stewarts Law: preparing for CFA reform

Stewarts Law has created a corporate investment vehicle to provide a tax-efficient opportunity for its equity partners to invest in and win returns on successful litigation.
The Lawyer newspaper reports today that the firm -- which has been a long-term operator of conditional-fee arrangements (CFAs) – has made the move in preparation for forthcoming drastic reforms to England’s CFA scheme as part of a review into civil costs by Appeal Court judge, Lord Justice Jackson.

Contingency fees

Managing partner John Cahill commented that: ‘In the post-Jackson environment, there’ll be a greater requirement for firms to offer contingency-fee deals to clients.’
The scheme has seen the establishment of SL Equity Partners, which will offer a vehicle for structured investments in litigation. Equity partners will be able to invest in cases, gaining a return for success, or those that are settled favourably.
Investing through a corporate entity will halve tax, reducing costs from 52 per cent for individual investors to 26 per cent at corporation rates.

Cash flow

Mr Cahill told the newspaper that the scheme as ‘an incredibly sensible way to prepare for the changes’, which will provide necessary cash flow for the firm.
Stewarts Law did not wish to become an alternative business structure to acquire external funds through a bank or private investor. Instead, it told The Lawyer that it wanted to keep its comparatively low debt at a ‘manageable level’.
The firm forecast strong revenue growth over the next year, building on 2011’s more than 29 per cent increase in net profit to £15.5m.

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