Before you start life after practice there are a number of steps you need to take. These range from dealing with your files to letting the Law Society and ATO know you’ve stopped trading.
What to do with work in progress
Even if you’ve sold your practice it’s likely that you’ll still have a number of open files. So what to do with this work in progress, or WIP?
Generally, you should apply a three-step approach to WIP.
- Finalise as many matters as you can and bill your clients before you leave. This is easier for conveyancing or probate matters.
- For matters that aren’t so easy to finalise (e.g. litigation) try to bill clients for any work you’ve done so far. If you can’t, make sure any sale agreement you’ve entered into lets you recover these fees from the purchaser.
- Reach an agreement with the purchaser so that you’re paid for any work that you’ve done on the open files you’re handing over to them.
Dealing with your files
If you’re handing over files to someone else in the firm you should be able to do so according to your own internal procedures (although you will have to advise any clients, for whom you’re an executor, that you will no longer be acting for them – see our section on Wills, Power of Attorney and Solicitor on Record below).
If you’re handing over files to a purchaser, make sure you retain the originals of any material you own and a copy of material that needs to stay on file.
One common flashpoint for dealing with files occurs when a seller claims a lien on the client’s file for unpaid costs but the new practitioner needs the file to continue proceedings or other work.
Sit down with the purchaser and nut out a protocol for dealing with files in case you need access to them or where a client asks for part of their file to be released. Also consider what will happen to the files if the purchaser decides to onsell the practice.
Generally, Rule 13 of the Solicitor's Conduct Rules covers how a client’s file should be handed over where a retainer has been terminated.
Sellers also often use the Law Society’s Tripartite Deed as a way of providing security for unpaid costs.
Find out more about our Tripartite Deed precedent.
Wills, Power of Attorney and solicitor on the record
If you do estate planning work, chances are you’re the named executor for a number of your clients’ wills. When you leave practice you’ll probably want to pass the responsibility onto someone else, most likely the purchaser.
Your first action should be to contact each client affected to let them know you’re leaving.
If you can’t contact a client you will need to sign a ‘Renunciation of Probate’ and leave it with the will.
Contact the NSW Trustee and Guardian if you’re an executor to whom probate has been granted or if you’re a trustee for beneficiaries who are minors.
If you have Power of Attorney for any clients you should consider what you will do in light of the Law Society’s Guidelines.
Where you’re a solicitor on the record, the steps you’ll need to take will be dictated by the relevant rules. Generally, you should lodge a ‘Notice of Change of Solicitor’ or other form (you can find more information in the Uniform Civil Procedure Rules 2005 Rule 7.29 and the Family Law Rules 2004 Rule 8.04).
When to stop taking instructions
Before you move on you’ll have to work out when to stop taking instructions. It’s probably best to do this once you’ve agreed to a sale or you know you’ll be closing the practice and you have an end date in mind.
Even before you stop taking instructions, you should probably assess how long every matter is likely to take before you agree to work on anything. If you take on a matter that's likely to run beyond your end date you’re obliged to let the client know of the sale or planned closure.
Letting your clients know
Solicitors Practice Rule 6 sets out what you’re obliged to do when it comes to letting your clients know about a closure or sale.
Generally, before transferring a file you need to give the client at least 14 days’ notice. You should also let each client know that they can choose not to have their files transferred.
If you hold money on a client’s behalf you need to let them know the exact balance you hold and give them 14 days’ notice of your intention to transfer it. You should again let your client know that they can choose to have the money transferred somewhere else.
You will also need to comply with the laws concerning Trust Accounts (this includes giving the Law Society 14 days’ written notice of your intention to cease practise and to cease receiving trust money).
Letting the Law Society know
Whenever you close or transfer a practice you need to let the Law Society know in writing. If you operate as an incorporated legal entity this includes lodging the approved form within 14 days of ceasing to trade.
You’re also obliged to notify the Law Society in writing if a partnership dissolves, a new one is formed, or if there’s any change to the makeup of an existing one including changes of Legal Practitioner Directors of incorporated Legal practices.
There are a number of other issues (and potential exposures) you should consider before you leave.
- It is recommended that you obtain independent financial and taxation advice on the consequences of selling your law practice prior to selling it.
- Whether you can end your lease or have the purchaser take it over (this is especially relevant if you operate as a sole practitioner)
- Whether you owe staff any money. If you’re transferring ownership or selling the practice generally any liability will generally fall on the new owner. However, if you’re closing you should make sure any employee entitlements are paid out
- When to close your office account (generally, only after you’ve received all outstanding income and have paid all invoices)
- Letting all suppliers know you’re leaving, including insurers, barristers you’ve briefed, utility providers and subscriptions
- Lodging a cessation of business name or closing down the company, as well as giving the Law Society 14 days notice of your intention to stop practising (this is obligatory for incorporated legal practices)
- Selling any equipment you no longer need, including your office furniture and legal library
- Consulting your accountant to make sure you’ve met all tax and other obligations.
Download our guide to Selling or Closing a Sole Practice.