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Incorporating your law firm - what you need to know

NZ $60.00
Christine Grice Ian Haynes Greg Thompson
Christine Grice
Harkness Henry & Co
Ian Haynes
Kensington Swan
Greg Thompson
Grant Thornton

Published: 20 July, 2007
Pages: 186


In March 2006 the Lawyers & Conveyancers Act 2006 (the Act) was passed. The Act will come into force, by order-in-council, on 1 July 2008 (letter to the profession from New Zealand Law Society President, dated 26 April 2006).

The Act introduces fundamental changes for both lawyers and consumers in relation to the structure and regulation of the legal profession. For the first time lawyers, including barristers sole, will be able to incorporate their practices. While there are restrictions on corporate structure and limitations of liability the benefits of incorporating your legal practice remain attractive. Recent changes announced in the budget (17 May 2007, Budget of the Hon Michael Cullen) bring a corporate tax rate of 30c in the dollar (from 33c in the dollar) and in addition there are some KiwiSaver options which employees of incorporated law firms (but not partners) may enjoy.

The profession has long sought the ability to incorporate. The legislation firmly maintains the control of the firm in the hands of the lawyers actually involved in the practice. The New Zealand Law Society sought, in its submissions to the Select Committee on the Lawyers and Conveyancers Bill, an extension of the definition of to include and permit beneficial shareholding by immediate family members or trusts for their benefit, but with the registered shareholders all being lawyers actively involved in the provision of legal services by the firm. This submission was not accepted and any voting shares must be owned by the actively involved lawyers.

The government also decided to exclude provisions allowing the operation of multi-disciplinary practises (“mdps”) for lawyers. This decision however does not prevent non-lawyers ie people without practising certificates, from performing legal services for clients of their employer outside the “reserved areas” (defined in the Act), nor does it prevent in-house, corporate or government lawyers from providing advice to their employers. Note: The exclusion of mdps occurred partway through the drafting of the Bill. The officials then had the unenviable job of extracting the mdp provisions, which permeated the legislation. This exercise explains the layers of definition which sometimes seem unwieldy.

This seminar is the first of a proposed series in relation to various aspects of the legislation. This seminar deals with the incorporation and structuring of law firms, the restrictions placed on structure by the Act, who may be shareholders and directors and the consequences and liability of directors, shareholders and employees. This seminar aims to provide some practical guidance for practitioners (including barristers sole) who are considering incorporating their legal practices, and covers the issues that are likely to arise, including tax and financial aspects of the incorporated law practice. When a practice decides to incorporate it faces the same issues that any venture faces on incorporation. Issues such as how decisions will be made, classes of shares, how votes are weighted, capital requirements, debt appetite, dividend policy and dispute resolution must all be considered. For many law firms the arrangements between principals have evolved, often there is no written partnership agreement or, if there is one, it was last seen 20 years ago and no one can find it. Many law firms will choose to continue with these arrangements and only want to know the basics about law firm incorporation. For others it is an opportunity to consider all aspects of their structure and relationship formally. We have tried to cater for lawyers who just want to know the basics as well as providing more in depth material – largely by bringing together, in one booklet, material from some previous NZLS booklets to give readers an appreciation of the wider issues.

Some of the other important areas in the Act are:

  • Codification of the four fundamental obligations on lawyers. These are at the heart of the legislation and bind all lawyers.
  • Specific definitions of “conveyancing”, “legal work”, “regulated services” and “reserved areas of work”.
  • Exclusivity for lawyers in “reserved areas” of work and for lawyers and conveyancing practitioners in conveyancing services.
  • Lawyers will be entitled to sell real estate for clients.
  • Introduction of a new occupation of “conveyancing practitioners” entitled to carry out conveyancing work.
  • Elimination of the “intervention rule”.
  • Queen’s Counsel become known as Senior Counsel. The rank becomes open to all lawyers, not just barristers-sole.
  • Introduction of a new complaints service which provides remedial processes and remedies in addition to a disciplinary process.
  • Introduction of a non-lawyer Legal Complaints Review Officer who has substantial powers in the review of complaints following consideration by a Standards Committee.
  • Separation of the representative and regulatory functions of the New Zealand Law Society.

The New Zealand Law Society is in the process of a drafting and consultation process required in the formulation of the various rules, regulations, and Codes of Conduct and Client Care which must be promulgated before the Act becomes operative. All of these must be approved by the Minister of Justice before they come into force. We have used the most up to date information available, but anticipate there will inevitably be some changes in the final versions of the rules, regulations and codes.

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Professional Liability

Publication Date: 10-Mar-2009

Author(s): Phil Cook, Daniel McLellan

NZ $55.00

Multiple Registration

Incorporating your law firm - working through the process

Publication Date: 13-Oct-2008

Author(s): Christine Grice, Ian Haynes, Greg Thompson

NZ $65.00

Multiple Registration
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