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The move comes four months after Law went into partnership with Praveen Kenneth, the former chief executive of St Luke's India, to form Law & Kenneth.

The new company will have a 26 per cent stake in Grounds Morris Smith.

The agency was set up 18 months ago by Martin Smith, the former Grey London chief executive, and the ex-Euro RSCG joint creative chiefs Steve Grounds and Rob Morris. Its client list includes Exchange & Mart and City AM.

The venture, renamed GMS Law & Kenneth, will now work on network clients including Freeplay Energy, the sustainable energy group, and Haier, which claims to be the world's largest white goods manufacturer.

Law & Kenneth has similar arrangements in Asia-Pacific, North and South America, Europe, India and Russia.

Smith said: "Our current business, from which Law & Kenneth will take no income, is ring-fenced. It's a no-lose situation."