Cash back // Brief

“Capital call” is not a term regularly tossed about at law firms, but after hearing some buzz about it on Bay Street, Precedent asked around

By Diane Peters

On Tuesday September 24th, 2013

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Every so often, law firms will issue something called a capital call. Since law firms pay out all their profits every year to partners, they sometimes need a way to get hold of a big chunk of money. Usually voted on by the executive or the partners, a capital call requires all the firm’s partners to put money into the kitty to fund a move or a merger, or to deal with a cash flow problem.

“They do this instead of borrowing money from the bank,” says Christopher Sweeney, CEO of ZSA Legal Recruitment. But you won’t see partners dashing to an ATM or writing cheques; usually the firm skims their wages for the next year. “If the call is made for strategic reasons, it may be accepted without complaint,” says Sweeney. “If it’s because the firm is doing poorly and a collective sacrifice must be made, then some partners, particularly those doing well, may be irritated.” 


Photo: Temmuz can Arsiray/iStockphoto