The Practical Lawyer

An article in the Gazette provides a useful reminder of the sort of provisions that should be in any well-drafted partnership (or LLP) agreement:

should there be an involuntary retirement provision (so allowing a partner to be forced out)? If so, should that power be vested in the management team, or is a wider vote required? In practice, most clauses require a high-percentage vote but that can then cause problems (eg if all partners who feel vulnerable support one another on the basis of safety in numbers). Check whether the clause makes it clear whether multiple exit candidates are entitled to vote on each other’s retirement;

If a firm wants to withdraw or cancel a training contract, then much will depend upon whether the SRA has jurisdiction.

A training contract must be signed by the firm and trainee, and then registered with the SRA within three months of the trainee commencing the training. The key point to note is that until the regulator receives the contract, it has no jurisdiction over the relationship between the parties. Accordingly, if a training contract is withdrawn before its commencement date, the firm can act unilaterally and terminate the training contract without fear of the SRA being involved.

’You must ensure that your firm pays to your client commission received over £20 unless the client, having been told the amount, or if the precise amount is not known, an approximate amount or how the amount is to be calculated, has agreed that your firm may keep it.’ (r2.06 Code of Conduct).

‘You must act in the best interests of each client.’ (r1.04 Code of Conduct).

‘The firm [must] account to the client for any pecuniary reward or other advantage which the firm receives from a third party.’ (r4(d) Financial Services (Scope) Rules).

It is important to appreciate that the rules on commission may not be found solely within the Code of Conduct. If financial services are involved (eg arranging an insurance policy; insurance mediation activities; regulated mortgage contract work), then the Financial Services (Scope) Rules 2001 apply, and they require ‘any’ reward to be fully accounted to the client. Note that under that provision there is no de minimus £20 provision (unlike in the Code of Conduct).

Rule 19 of the Solicitors Accounts Rules 1998 states:

’(2) a solicitor who properly requires payment of his or her fees from money held for a client or trust in a client account must first give or send a bill of costs... to the client or the paying party.’

‘(3) once the solicitor has complied with Para (2) above, the money earmarked for costs becomes office money and must be transferred out of the client account within 14 days.’

Do you know what a PEP is? The answer is that it is an abbreviation for Politically Exposed Persons.

The concern is that there are a number of corrupt politicians and PEPs around the world (eg stripping national assets, or bribery) who might seek to use the UK to set up companies and trusts to help channel funds out of their country, and to buy properties and other investments in the UK.

It is obviously always important to ensure that you have full authority from a client before acting in litigation. If a company is involved, then this means ensuring that you do indeed have the proper, legitimate, authority of the company – and not just of an individual associated with the company. For instance, has any required board meeting ever actually been held (and the minutes prepared)?

The start of the new personal indemnity insurance year has caused problems for many firms (eg one firm is reported in the Gazette as having had an increase in premium from £20,000 to £110,000 – which is about a quarter of the firm’s turnover). See [2009] LSG 17 September 1.

Some parts of the profession are only now waking up to the dangers posed by consumer protection regs introduced over the last 20 years. Indeed, there are now major fears that a large number of existing retainers will prove to be unenforceable because of an inadvertent breach of these (largely unknown) regs.

Contingency fees in tribunals (in particular, employment tribunals, but also VAT and duties tribunals) are likely to be curtailed because of ‘irresponsible’ employment lawyers who are said to be exploiting vulnerable clients. [2009] LSG 21 May 1.

If your partnership has a mandatory retirement age then it is important to be able to justify and provide sound business reasons for such a provision.