17 June 2021, by Shafiq Sobri
There could be various reasons to close a law practice. Maybe you are a sole practitioner joining another law practice as a partner or have decided to cease practice to become an in-house legal officer or maybe you have decided it’s time to retire. Whatever the reason is, closing your law practice must be done properly and strategically. It may seem simple, but you need to be wary of issues concerning your clients’ interests – past and present – to ensure that they are not prejudiced.
It may be a long and daunting process especially if you have a lot of active files in the law practice prior to the closure. It is hoped that these tips may be of assistance to plan a proper closure of your law practice.
1. Comply with the Bar Council Rules and Rulings on Cessation of Practice
Chapter 13 of the Bar Council’s Rules and Rulings prescribes the rules in relation to cessation of practice. Ensure that your law practice’s closure complies with the rules and rulings concerning:
- Your intentions to change status of practise;
- Your intention to close the law firm;
- Your clients’ accounts; and
- Your client’s documents.
2. Set a closing date
Setting a closing date will depend on several factors such as the number of active files, progress of the files, outstanding tasks, and deadlines (such as court dates). It is advisable to set a realistic closing date to ensure that all matters have been attended to and sorted before the targeted closing date.
Prepare an inventory of all files together with status, so you do not miss any dates or next action. An inventory will also help you to categorise files which you need to collect or follow up on payment, or to label as inactive. Once categorisation is done, you can then prioritize files according to the files’ deadlines based on your timeline to close the law practice, and files that you may need to get clients’ consent to transfer to another lawyer/law practice to take over.
To avoid potential conflicts in the future, it is advisable that you refrain from consulting new or potential clients once you have set a closing date.
Practice tip
Having a checklist of items or tasks that you need to attend will be a good start. Planning a firm’s closure involves a lot of work and keeping a checklist will keep you organised and ensure that you do not miss any step along the way. |
3. File management
Ensure that your files retention or disposal policy comply with the Personal Data Protection Act 2010 and Chapter 18 of the Bar Council’s Rules and Rulings. For closed files, review the file’s individual file closure checklist to see if there are issues pending before making a decision on the file. If you have not prepared any individual file closure checklist, use the suggested checklist
available on our website by clicking here. Keep copies of the individual checklist for future reference.
Since you are closing your la practice, you definitely want to reduce storage cost as much as possible. However, considering the limitation period for your client to make a claim against you, do consider prudent methods to retain your files until such time after the limitation period has passed and the minimum requirement to comply under Chapter 18 of the Bar Council’s Rules and Rulings.
Practice tips
Keep hard copies of important documents relating to the file, such as client’s instructions and approved drafts. If you intend to keep your documents in soft copy format to reduce storage costs, remember not to misplace the external drive/thumb drive/server. Regularly check stored documents to make sure that they are still intact. |
Note: As at 10 June 2021, Bar Council has yet to make a decision on the use of cloud storage.
4. Communicate with your clients – past and present
Ensure that all clients – past and present – are properly informed about the law firm’s closure. Be it by way of letter or email, include the relevant information such as the closure date, the status of their file(s) and the procedure to transfer their file(s) to another lawyer/law firm. Where applicable, include information such as:
- Immediate action/instruction and its deadline;
- Limitation dates;
- Billing information; and
- Status of their original documents.
Give clients time to find a new lawyer to take over their file(s), and help in the transmission of the physical file(s) to the new lawyer.
Record a date to follow up with clients for their consent to transfer the file or for their new lawyer to take over or file a Notice of Change of Solicitors / Notice of Discharge, where necessary.
Practice tips
While there could be many reasons for closing your law practice, who knows there are also reasons for you to re-open in the future. Maintaining a good and professional relationship with your clients amid the closure is key to a client’s trust and confidence. They could be your clients again in the future! |
5. Close all your accounts
Take note that you must close all your client accounts within two months of cessation or closure of the law practice, unless an extended period is approved by the Bar Council. Provide your final accountant’s report to the Bar Council within six months of your cessation or closure of law practice. Make sure to appoint an auditor to prepare an audited report of your client accounts for this purpose.
Prior to closing of the client accounts, a law practice must discharge their duties which include:
- The return of money to the client;
- The transfer of money to another legal firm as instructed by the client;
- The transfer of money to the Bar Council if necessary; and
- Remitting unclaimed money to the Unclaimed Moneys Management Division of the Accountant General’s Department of Malaysia.
Apart from your bank accounts, ensure that all your office utilities and subscriptions (eg online references) accounts are closed.
6. Lastly, your Professional Indemnity Insurance
You can have a peace of mind knowing that the Master Policy under the Professional Indemnity Insurance (“PII”) Scheme will continue to provide cover to you and the law practice in the event of a claim. The cover under the PII policy is for claims arising from an act whilst your law practice was in practice provided it was closed in compliance with the Bar Council’s Rules and Rulings, subject to all terms and conditions under the policy.