Closure due to death, illness or incapacity
Nobody likes to accept that at any time we may be forced out of practice due to ill health or death.
In this series, written by solicitor Richard Nelson, we outline some of the key issues surrounding closing your practice. In this article we focus on closure due to death, illness or incapacity.
The Solicitors Assistance Scheme offers up to an hour of free advice on the issues which arise on closure.
Some solicitors find it difficult even to protect their loved ones by making a Will and a Lasting Power of Attorney (“LPA”). They know they should, but they delay. Even those who act for clients who have suffered unforeseen disasters persuade themselves they have plenty of time to take these obvious precautions.
It is even more important for a principal in a practice to ensure that protective steps have been put in place. There should be special clauses in Wills and LPA’s to cover the practice and its management and to achieve an appropriate valuation.
It is particularly important for a sole practitioner to prepare for their absence and often the practice has provided the main source of income for their family. Without special arrangements the practice will be rudderless which may lead to intervention by the SRA.
The spouse, civil partner, or personal representative of a deceased or sole practitioner who is incapacitated may have authority to deal with the affairs of the solicitor but not be entitled to run the practice. In those cases they will need to appoint another solicitor to manage the practice. Without a Will nobody has authority to deal with the assets pending a grant of Letters of Administration which can take weeks to obtain. All this will place a greater burden on the bereaved at the worst time as they struggle to come to terms with a devastating event.
"Many of these cases will require urgent advice from experienced regulatory solicitors and this should be sought as soon as it becomes evident that the problem does or may exist. There are some solicitors who offer assistance to manage or close practices on a voluntary basis."
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Closing the practice
If preparations have not been made the practice may have to close. In the absence of a duly appointed suitable solicitor manager nobody will be at the helm, and the SRA will have to step in with the attendant cost to the absent solicitor’s estate.
It may be possible to arrange a voluntary closure. There are firms who will assist with this and liaise with the SRA. Indeed some solicitors have agreed to be named as executors and attorneys specifically to deal with the management and/or closure of the practice on a professional basis on a just in case basis.
It will make no difference that there are competent employees or that the practice is profitable if there is nobody with authority to manage it and to realise the value and WIP.
On closure the ongoing storage of client files and the ongoing cost is a liability of the principal and so of their estate.
It may be possible to sell the practice and or to transfer the assets and client base but these things usually do not happen overnight and so a qualified manager will need to be involved and take responsibility.
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Absence due to sickness
If there is a temporary absence due to sickness a solicitor manager will need to be involved. It may be possible to find a friend who agrees to do it for a short period but it is key to ensure that there is proper supervision of the practice itself and the staff, and proper control of the live caseload.
Practitioners are used to making arrangements to cover short-term absences such as for holiday, but if the illness, planned or otherwise, (e.g to undergo planned hospital treatment) is likely to be for any prolonged period, formal control of the practice will be necessary and it is unlikely to be appropriate merely to appoint a locum.
In most cases where solicitors become seriously ill, such as due to covid, the prognosis is uncertain but whilst unwell the solicitor will not be in a position to provide supervision.
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If there are remaining partners
The situation is slightly different if one of two partners in a practice becomes incapacitated or dies.
In the event of death the remaining partner whether salaried or equity has the responsibility to continue to manage the practice. The salient point here is that the recognition of the practice is that of a partnership and not of a sole practitioner. A short period of grace is granted by the SRA to enable the surviving partner to find a replacement partner or to apply for recognition as a sole practitioner.
The surviving beneficiary of the deceased principal may need to negotiate about their future involvement in the firm or to realise the value of the deceased partner’s share. This can become more complicated when the beneficiary is also an unqualified employee within the firm.
Clearly there is a conflict of interest relating to aspects of the relationships and it is important that independent advice is taken by the personal representative to achieve what they wish as an outcome.
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Staff and clients
In all cases staff and clients will need to be informed and reassured. Following any such event, particularly after a sudden death, there will be practical issues about the management of ongoing cases and commitments to ongoing court cases.
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Expert advice
These issues will need to be addressed on a bespoke basis by a regulatory solicitor who is fully aware of the expectations and requirements of the SRA as well as the commercial implications.
Richard Nelson is a solicitor in private practice at Richard Nelson LLP specialising in solicitors disciplinary, regulatory and practice management matters. He is a member of the Solicitors Assistance Scheme and the Regulatory Processes Committee of The Law Society. Any comments made or views expressed are his own and not those of or on behalf of any other organisation or party.
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