A sole practitioner / principal who is planning prudently for the future of his / her firm needs to make a will and also to execute three deeds, as set out below.
- Agreement for Management;
- Power of Attorney;
- Enduring Power of Attorney.
The will obviously will cover the situation where the solicitor dies in practice. The three deeds are needed to cover eventualities during the solicitor’s life that might prohibit him / her from practising.
Will
It goes without saying that all sole practitioners / principals should make a will appointing a solicitor as one of their executors to deal with the disposal of the practice after their death.
Solicitors should be aware that, with regard to the period between a solicitor’s death and the issue of the grant, the Solicitors Acts provide that a solicitor may be appointed to the practice with the consent of the Law Society, on a temporary basis, pending the issue of a Grant of Probate or Administration. However, non-legal family members might not have the experience or expertise to recruit a suitable solicitor without the assistance of a solicitor executor.
Suggested clauses for a solicitor’s will, were published in the October, 2005 Gazette, p29, available at www.lawsociety.ie/Gazette/oct05.pdf.
Agreement for Management – to be used if the Solicitor is likely to return to practise
In this scenario the practitioner / principal continues to hold a current practising certificate and continues to be responsible for all matters relating to the firm.
A precedent is offered below. As with any precedent it can be amended freely to suit individual circumstances. At a minimum, it will operate as a useful checklist for matters that may need attention.
The agreement is a simple agreement for management services. Under this agreement, there is no question of the manager having power to sell or wind up the practice. The agreement would cover temporary absences from the office, where the solicitor is likely to return to the practice and resume as sole practitioner / principal.
This Agreement would cover illnesses, both physical and mental - for instance long stays in a general hospital, or long stays in a mental hospital recovering from, for example, depression, alcoholism, and so on. It would not cover a situation where the solicitor had permanently lost mental capacity. It would also cover unexplained absences or abandonment. However, solicitors are reminded that reckless abandonment may have serious repercussions in terms of regulatory action being taken by the Law Society against the solicitor or negligence actions being taken by clients who suffer a loss.
The agreement, suitably amended, could also be used by sole practitioners / principals who are going on maternity leave. For instance, the manager might be an assistant solicitor in the firm who is asked to take charge during the maternity leave period.
In most circumstances it will not be difficult to trigger the commencement of the agreement. However, it is recognised that there are some situations where it would be difficult to do so.
The Solicitors Acts provide that the High Court may appoint another solicitor to carry on a practice in the event of the incapacity or bankruptcy of a sole practitioner or the abandonment by a sole practitioner of his / her practice. However, this is an expensive and cumbersome alternative to having a detailed management agreement in place, which has been agreed by both the solicitor and the manager and which reflects the wishes of both.
Power of Attorney – to be used if the solicitor will not, or is unlikely to return to practice in his / her former role
The Power of Attorney will be used only if the practice is to be sold, to give the Attorney the necessary powers to do this. A standard deed can be used.
Without a Power of Attorney the practice cannot be sold by another solicitor. The power could be exercised where the solicitor is compos mentis but too ill to attend to, or does not wish to attend to, business affairs. In this scenario, the sole practitioner / principal might or might not hold a current practising certificate.
Again, the sole practitioner / principal will continue to be responsible for all matters relating to the practice.
It is recommended that the powers given in this deed are limited to matters relating to the sale of the practice. While the named attorney might also be the named manager in an agreement for management, the management arrangement is best dealt with separately in the detailed Agreement for Management.
Enduring Power of Attorney – to be used if the solicitor is not compos mentis and will not, or is unlikely to return, to practise
In this scenario, the presumption would be that the solicitor is no longer in practice and no longer compos mentis. The Enduring Power of Attorney would be used to sell the practice and to do any acts necessary to facilitate this.
The standard Law Society precedent can be used. This can be accessed on the members’ area of the Law Society website www.lawsociety.ie
Who should be selected to be the Executor / Manager / Attorney?
Many solicitors may decide to have a reciprocal arrangement with another sole practitioner and this may be appropriate for them. However, it should be remembered that the duties being undertaken may be onerous. In some situations, a better alternative would be to make an arrangement with a medium to large firm to give a professional service should the need arise. The cost of doing this would have to be taken into account.
The solicitor selected should have sufficient experience and time to manage the practice, as well as continuing with his / her existing commitments.
Remuneration for Manager
The precedent Agreement for Management below sets out a formula for remuneration which is to be an average hourly rate that an assistant solicitor of ten year’s standing would be paid. Solicitors might wish to negotiate a different formula. However, this formula is suggested in the context of a reciprocal arrangement being made between two solicitor friends / colleagues.
Budgeting for the New Situation
It is clear that if a sole practitioner cannot attend at his / her offices, there may be additional expenses incurred. Solicitors should be aware that not only do they need to plan for the emergencies, but they also need to budget for them. For instance, if there is a decision to wind up the practice, rather than sell it, this can be a very expensive exercise. It is labour intensive, and significant costs may have to be paid. Files that can be destroyed may have to be destroyed professionally. Another solicitor’s firm may have to be paid to take all the files not distributed to clients.
In situations where a locum solicitor will be employed, this too is an additional cost. Locum solicitors are expensive to employ and are unlikely to bring in the level of fees that the solicitor himself / herself would have brought in, so that there will be less money than usual available to pay for overheads.
Insurance Policies
Solicitors could consult with their brokers to check out whether an income protection insurance (known as permanent health) policy or Keyman insurance policy should be put in place as part of the emergency plan. Some premiums may be tax deductible.
Inform the Law Society, a member of staff and a member of the family
It is important that the Law Society, a member of staff and a member of the solicitor’s family should be informed of the arrangements that a solicitor has made for emergencies.
As all solicitors know, making a will and not telling anyone about it can prove to have been a futile exercise, if the will is never found after a person’s death. Likewise, if no-one is aware of the arrangements that have been put in place for emergencies, there will be needless upset and inconvenience to all concerned if an emergency does occur.
Objectives
The objective of having a plan for emergencies is to minimise the disruption to clients’ affairs. The position of staff will also be secured. It is also to ensure that the practice can continue, if this is what the solicitor and/or his family wish. However, if the wish is that the practice be sold, then the powers are in place to do so.
In the event that there is a vacuum, then it is likely that the Law Society will have to become involved and the only option may be for the Society to require that the firm cease trading. It would then be closed and the clients asked to nominate new solicitors. This might not be in accordance with what the solicitor would have wished, particularly if the likelihood is that he/she will return to practice. In addition, it is likely that all expenses incurred by the Society in the exercise of its statutory duty, including the salaries of personnel involved in carrying out the function, will be charged to the solicitor or his estate.
Authority to Operate Bank Account
There are some situations where the full emergency plan would not need to be triggered, but the emergency might be met by having an authority in place simply to operate the firm’s bank accounts.
Click on the link below for a copy of the AGREEMENT PROVIDING FOR THE TEMPORARY MANAGEMENT OF A SOLICITOR’S FIRM DURING THE INCAPACITY OF A SOLE PRACTITIONER/PRINCIPAL