King & Wood Mallesons (KWM) has told lawyers and staff they will be paid in January but salaries cannot be guaranteed beyond then, The Lawyer has learned.
It is understood news about the February wage slip was communicated to lawyers in the event a successful takeover does not take place.
A takeover deal needs to be completed this week, The Lawyer understands, ahead of a rent payment due on 23 December and the January tax bill.
KWM declined to comment.
Dentons and KWM’s Chinese partnership are in talks to buy out large chunks of the remaining UK, Europe and Middle East partnership, with talks expected to conclude before the end of the week.
Firms including DLA Piper, Greenberg Traurig and Winston & Strawn are also in talks to pick up teams of partners including the real estate practice and the regulatory and litigation teams.
KWM bosses confirmed they were entering “detailed discussions” with a “small number of parties” about selling off the EUME arm last Friday, following an all-partner meeting on the existing offers.
Partners are not expected to vote on the proposed deals but will be offered a set of terms to agree to a takeover and stop the firm being put into administration.
The Lawyer revealed last week Barclays had taken out a second debentureover KWM’s assets understood to be more “all encompassing” than the debenture it secured over the summer. The extra layer of security came as it became increasingly likely KWM would enter into a pre-pack administration.
KWM admitted it would need to find a buyer for its EUME arm in November as it emerged its £14m China rescue deal had failed. Only one fifth of the remaining 130 EUME partners agreed to the terms of the deal, which included signing 12-month lock-ins.
The cash injection was needed for the firm to pay its rental liabilities, meet its financial obligations to lenders and pay its January tax bill.
KWM first agreed to improve security around its borrowings from Barclays in the summer, signing a debenture with the lender on 27 July.
The debenture created a series of fixed and floating charges over the firm’s assets, including its revenue stream and real estate.
It also stated the bank can appoint an administrator if KWM fails to meet its financial responsibilities.
In July the firm first voted through a recapitalisation plan, with 98 per cent of partners agreeing to commit in excess of £14m to the business. KWM also asked salaried partners to contribute capital for the first time.
The capital call failed following the shock resignations of four big-hitter partners including head of investment funds Michael Halford and former managing partner Rob Day.
A number of partners have followed in their wake, including former EUME head William Boss, who is moving to Addleshaw Goddard, and head of litigation Craig Pollack, who is understood to be moving to Covington & Burling.
Global managing partner Stuart Fuller also stepped down from his role in recent weeks, returning to fee-earning in Australia. The process to find his successor is ongoing and is due to complete before the end of the year.
KWM is being advised on its restructuring plans by AlixPartners and CMS Cameron McKenna partner Rita Lowe.