Opening or closing a practice

Read on for regulatory guidance on what you need to know for commencement and cessation of practice, as well as planning for emergencies.

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  • Regulation
  • Practice Support

Commencement of practice

Opening a firm well means getting the essentials right on day one. A solicitor opening a practice needs:

  • a current practising certificate (PC);
  • Professional Indemnity Insurance (PII) confirmed by your broker via our online PII portal;
  • to complete the Law Society Commencement in Practice application;
  • to include a copy of your firm’s proposed letterhead and notepaper, listing the names of all solicitors in the firm that currently hold a PC, differentiating between principals and non-principals. Non-practising solicitors and non-solicitors can be included if their status is clearly stated; and
  • your proposed financial year-end and reporting accountant details or a statutory declaration that your firm does not hold client monies.

There is no regulatory distinction between salaried and equity partners. Ensure that the partners in your firm are aware that all partners have joint and several liability.

PII – succeeding practice and phoenix firms

You are required, due to phoenix firm protective measures, to flag in your application if your new firm meets any of the criteria for a succeeding practice under the PII regulations or has a principal who has a previous firm that entered the Run-off Fund.

Ceasing practice

Plan your cessation at least 12 months in advance, whether it be a wind-up, retirement, sale, transfer, merger, partnership dissolution or change in structure.

  • What the Law Society needs to know

    • Your proposed date of cessation
    • Home/correspondence address
    • Contact mobile and email
    • Details of file and sensitive documentation distribution and storage
    • Written confirmation from the practising solicitor with access to your files
    • Confirmation of entry to the Run-off Fund or a succeeding practice proof, and
    • A closing reporting accountant’s report.

Run-off cover and succeeding practices

The Run-off Fund provides six years of run-off cover for eligible firms without succeeding practices and is free at point of entry for compliant firms with the same minimum terms and conditions as your last policy of PII. Non-compliant firms are required to pay additional self-insured excesses and a premium.

If your firm has a succeeding practice, then the succeeding practice will take over the files and client accounts of your ceasing firm and needs to have PII cover in place.

To avoid being deemed a succeeding practice, do not include any reference to the closed firm in any of your firm’s stationery, website, social media, promotional material or advertising. Make it clear to clients that your firm is not a continuation of the ceased firm. Send a written notification to the Law Society that you are taking on client files, but you are not a succeeding practice.

Also note:

  • It is advisable to set your cessation date as 30 November, as PII cover usually runs until 30 November each year. You must apply for entry to the Run-off Fund at least 60 days in advance of your date of cessation.
  • The client owns their own file, not the firm. On cessation, you cannot retain open or closed client files at your private property. Take care with deeds, wills and enduring powers of attorney. Place closed files in professional storage, accessible via your nominated practising solicitor. Tell your local Bar Association and the Law Society about your arrangements.
  • Undertakings create a personal liability that persists after sale or wind-up. Limitation periods in conduct do not apply to enforcement.
  • You cannot hold client monies without a current PC. File a closing reporting accountant’s report covering the period from your last annual report to the date that the client balances went to zero (as per bank statements) within 3 months of your date of cessation. You can apply to the Law Society for an extension of the filing deadline and must continue filing annual reports until your closing report is filed.
  • If making a structure change, for example from a sole principal to a partnership, you should close existing bank accounts and open new ones. Alternatively, submit a closing report within the required period and include a banker’s letter noting the change date, a copy of the new bank mandate, and your reporting accountant’s written confirmation of the change.

  • Emergency planning

    It’s important to have a written emergency plan in place, and review and update the plan annually.

    The plan should include:

    • your nominated practice manager with their current written consent,
    • your will appointing a practising solicitor as ‘special executor’ in relation to your practice,
    • an agreement for management if you are temporarily indisposed and will likely return to practice,
    • power of attorney and enduring power of attorney (where you are unlikely to return to practice),
    • plans for remuneration by you or your estate for these services (consider Keyman or Income Protection Insurance),
    • authority to operate the bank accounts of your firm, and
    • the location of any relevant information and passwords.

    Make multiple copies of your emergency plan and ensure that relevant people are aware of the location of the plan, including family, your executor, your staff, and the Law Society.

    Contact your broker, accountant, the SPF Manager and the Law Society as early as possible if thinking about closing your practice.

    Practice managers

    If a sole principal dies or becomes incapacitated, their practice cannot lawfully continue trading until a solicitor is appointed to manage the wind-down, sale or transfer of the firm

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