What would happen to your files if the office was flooded?
What would happen to your firm if you died?
What would happen to your client account if you suddenly lost mental capacity?
Horrible questions, but ones you need to consider to demonstrate to the SRA that contingency plans are in place, and clients are protected. Having put things in place to help tackle difficult situations, will also help you sleep a little easier.
Depending on the size of your firm, you will want to check that this is dealt with in your Partnership Agreement or Memorandum and Articles. You may wish to put Keyman Insurance in place for dealing with this. As a Sole Practitioner, it is vital that your Will appoints a Special Executor. As well as the usual Executors and Trustees for dealing with the rest of your estate, you will need to appoint a practising solicitor to deal specifically with your firm. Encyclopedia of Forms and Precedents (EF&P) from LexisNexis has a very good Testamentary clause for this. I recommend that you contact a specialist solicitor, ideally one who is a member of the Society of Trust and Estate Practitioners (STEP), who will be able to assist you in drawing up a suitable Will.
2. Mental Incapacity
Rather than assuming you will be able to spot the symptoms of on-set of dementia and illness and put an attorney in place, you must have plans in place to deal with situations in advance. Often, in cases of accident or illness, if this happens suddenly people are unable to manage their financial and business affairs as they once could. As a result, it is essential to pre-plan. The Lasting Power of Attorney (LPA) for Property and Financial Affairs can be set up, so that you have one document for your personal assets and a separate one, appointing a practising solicitor, specifically for dealing with your firm. It might be practical for you to appoint two solicitors to act, jointly and severally. You need to register the LPA so that it can be used as soon as it is needed. If client monies can’t be accessed because you have lost capacity and funds are tied up, leaving clients disadvantaged, the SRA may need to intervene.
Choosing your attorney:
As well as being a practising solicitor, your Attorney should have sufficient experience and time to manage your firm as well as retaining existing commitments. Review this regularly, to ensure they are still happy to act for you, perhaps agreeing a fee structure and guidelines in advance. You want to ensure that your chosen attorney will act if/when the time comes.
You also need to make sure that this is not an academic exercise - do your family, colleagues and attorney know about the LPA and where it is stored?
GUIDANCE ON WORDING: You may wish to set out in the Preferences and Instructions: “This Lasting Power of Attorney gives my Attorneys general authority to act on my behalf only in relation to my firm known as [name of firm]”
3. Additional Signatories at the Bank – Death and Mental Incapacity
You do not want clients to be disadvantaged - if something happens to cause your client account to be frozen, making client monies inaccessible, the SRA may intervene. It is recommended that you appoint a trusted person as a signatory to your bank accounts. For practical reasons, it may make sense to appoint the same practising solicitor who is your Executor and/or Attorney. It used to be that signatories were disclosed in Solicitors Accountants Reports and that giving another person access to client funds was viewed as an additional risk by insurers. This step is vital to Continuity planning.
4. What will happen next?
Your Executor or Attorney may need to wind up or sell the practice. There is advice on how to do this on the SRA website. The more guidance that you can provide to the solicitors acting for you as Executor and Attorney, the better. If you are a sole practitioner or a very small firm, giving details on who your accountant is, who your PI insurer is etc. would be useful.
5. Additional Signatories at the Bank – Death and Mental Incapacity
So, you’ve dealt with the big issues, but it’s also good to plan ahead to try to pre-empt other issues from arising and prepare a back-up plan. If you’re in a huge firm, you may need a complex plan, but for a smaller firm a simple plan, like keeping a back-up of electronic information in case your hard-drive dies, should be enough. Here’s a sample plan that I’ve prepared, which I am happy for you to tailor for your own firm, if that helps. Comments and improvements are always welcome, so please let me know!Download the PDF version
About Karen Purdy
Karen Purdy set up Purdys Solicitors in 2003, as a niche private client firm. She is a sole principal and heads a team of specialist solicitors, advising on Trusts, Wills, Probate and Contentious Probate.
Karen graduated in Law from Trinity College, Cambridge and then studied at the College of Law in Guildford. Karen has practical and academic experience, having been a co-author of legal texts, presented seminars and is also a Member of the Society of Trust and Estate Practitioners (STEP).
Karen was a Committee Member and former Chairman of the Sole Practitioners Group (SPG).