GOING OUT ON YOUR OWN

PART 1: Starting your own firm

There is just something about the beginning of spring. 

Flower’s blooming, baby animals running around, the first rains. And all the promises of tomorrow.

There is something about the possibilities that the beginning of spring holds. Like anything is possible.

Full of opportunity. Full of bright sunny days.

And as you begin to think about all of this – you notice a baby bird flying from its nest in search of its own tomorrow and you begin to feel a little fluttering in your stomach, a little juggle at the base of your spine. Something’s happening.

You get the shivers….. it’s almost like excitement. 

And suddenly, out of nowhere, Annie Lennox’s “Little Bird” starts to play melodically in your mind, whilst you happily hum along – 

“But this little bird’s fallen out of that nest now

I’ve got a feeling that it might have been blessed

So I’ve just got to put these wings to test”.

And your brain juices start flowing…..

This little bird’s fallen out of that nest now

You have made the decision – the time has come for you to go out on your own. You are ready. And you are so amped!

You are going to start your own law firm – you never imagined it was possible. But it is! 

But as you head out on your own down the yellow brick road of opportunities, you begin to realise the enormity of your decision. 

Fear not little bird! 

We understand first-hand what it means to “fly the coop” and we are here to offer our support. After all, AJS, didn’t just fall from the sky ready to provide services. We too had to start from somewhere. And we have learnt that being an entrepreneur has many perks. But it can also be tough. 

Starting your own law firm is no different. 

However, think of us as your guardian angels, ready to provide you with a little insight, a little heads-up, a little info and a little guidance on how and where to get started. 

Ready?

It’s time to fly the coop

We know you are excited and you have every right to be. But in order to ensure that your fledgling legal practice starts out with every opportunity firmly within its grasp, there are some important practicalities that you need to begin with. 

It may seem sort of like starting from ground zero. But you know the best thing about that? There is nowhere to go but up!

So get on up!

First thing’s first – the relevant legislation to kick us off!

According to the Legal Practice Act No 28 of 2014, specifically at Section 84 and 85 thereof, there are a few initial steps you need to take before you are able to start your own law firm – 

1. Complete a legal practice management course approved by the Legal Practice Council (LPC)

Section 85(1)(b) of the Legal Practice Act states that every legal practitioner who, for the first time practices for his or her own account either alone or in partnership must – within the period of one year after the date on which he or she was required for the first time to be in possession of a Fidelity Fund certificate (or within a further period as the Council may approve in any specific case) – complete a legal practice management course approved by the Council.

The legal practice management course is intended to assist legal practitioners manage their legal practice efficiently by combining their own legal expertise together with strategic business management.

One such LPC legal practice management approved course (referred to as practice management training or PMT) is offered by Legal Education and Development (L.E.A.D).

According to LEAD, the course – 

“focuses on the fundamentals of practice management relating to management, marketing, technology and finance. Its ultimate aim is to provide legal practitioners with the tools to manage their practices more efficiently on a sustained basis in order to improve standards of practice of the legal profession and service delivery to clients.

The course, which is subsidised by the Legal Practitioners’ Fidelity Fund, is designed to provide training and guidance to legal practitioners on inter alia:

• effectively starting a practice;
• combining legal expertise with strategic business management;
• applying resources productively;
• practising in a financially sound manner;
• marketing for profitability;
• ensuring risk management and control; and
• Administering the affairs of clients and the business prudently”.

The duration of the course is 4 months and costs R2 400 (VAT inclusive). This amount should be confirmed annually.

It is important to note that in order to complete the course, participants are required to have a satisfactory attendance record of the training (which is in eight modules) and must also pass the three compulsory assignments and online assessments (tests and quizzes). 

Participants are required to complete the entire PMT course in full within 12 months from the date of first registration.

2. Obtain a Fidelity Fund Certificate

According to Section 84(2) and (3) of the Legal Practice Act, a legal practitioner cannot receive or hold funds or property (which they are often required to do) unless they are in possession of a Fidelity Fund certificate. 

The Legal Practitioners Fidelity Fund website sets out the practicalities of this – 

“In order to obtain a Fidelity Fund Certificate in terms of the Act and its Rules, legal practitioners must satisfy the following requirements:-

• The annual contribution of R345.00 (VAT inclusive) as stated at Section 54(b) of the Legal Practice Act and at Rule 3.1. of the Rules ( as provided for in Section 95 of the Legal Practice Act) payable by the applicant to the Council for the issuing of the certificate;
• Proof of completion of the Practice Management Training before applying for the first Fidelity Fund Certificate, subject to the provisions of Rule 27.1 of the Rules;
• Timeous submission of the trust account audit report/s (in respect of all practices in which the legal practitioner is either sole practitioner/partner/director); approved by the Council; and
• The completed application, which now also includes the Attorneys Insurance Indemnity Fund risk questionnaire”.

The Fidelity Fund portal can be accessed here.

The completed form must be accompanied by a single (once-off) Fidelity Fund contribution of R1000-00 (this amount may be subject to change, so it is best to confirm with the Legal Practitioners Fidelity Fund or the LPC).

3. Open up bank accounts 

Once you have completed your PMT training and have applied for a Fidelity Fund Certificate, it is time to comply with other basic “financial requirements” such as the opening up of banking accounts i.e. a trust banking account as well as a business banking account as set out in Section 86 and 87 of the Legal Practice Act.

Makes sense right?

Basically every legal practitioner (referred to in Section 84(1) of the Legal Practice Act) must operate a trust account. The trust account must be kept at a bank with which the Legal Practitioners’ Fidelity Fund has made an arrangement to hold the trust account (as set out in Section 63(1)(g).

Where interest has accrued (on the trust account), the funds may be deposited into a separate trust savings account or other interest-bearing account for the purposes of investing the interest. 

An important caveat here is that the law firm must keep proper accounting records containing info on: 

a) money received and paid on its own account; 

b) any money received, held or paid on account of any person; 

c) money invested in a trust account or other interest-bearing account referred to in Section 86; and 

d) any interest on money invested which is paid over or credited to it.

The LPC may inspect the accounting records of a law firm in order to satisfy itself that everything is above board. If something is found to be suspect, the LPC may write up the accounting records of the trust account and recover the costs of the inspection and the writing up of the accounting records from the trust account practice concerned.

Not advisable. At all! 

You see, the responsibility of managing each individual trust account is up to the legal practitioner, whether they are practising for their own account – either alone or as a partner, or as a member or director of a juristic entity, or as an s 34(2)(b) advocate. 

Therefore you should always ensure that reasonable measures and controls have been implemented to ensure compliance with these obligations. 

By ensuring that certain measurements and controls are in place, you not only guarantee professionalism and ethical conduct within your law firm but you also safeguard the proper management of risk of theft or misappropriation of funds or property. 

The appointment of decent auditors is therefore highly recommended!

4. Appoint auditors 

It seems so obvious. But we forget – operating a law firm involves the handling of trust money. And this, in and of itself, requires certain measures to be in place to ensure that everyone is playing by the same rules. It makes sense, if you think about it. 

Therefore, in order to comply with the above trust account requirements, a new law firm must appoint an auditor (i.e. a person who is registered as an auditor in terms of the Auditing Profession Act, 26 of 2005 and who engages in public practice as an auditor) as defined in the Rules.

5. Last but not least – submit law firm name and details for approval

If we look at the Definitions of what a main office and principal place of practice is (as set out in the Rules), it becomes quite obvious that the LPC needs details of what the proposed name of the law firm is, where it is located, who is involved in it and what the letterhead will look like (to ensure that it complies with standards as set out in the Rules).

Kind of reminds one of registering a new company with CIPC. Same-same but different. 

Therefore with all new law firms the following information should be provided (together with the completed application as set out above) to the LPC for approval – 

1. A certified copy of the legal practitioner’s identity document (and this includes all legal practitioners and candidate attorneys within the proposed new law firm);
2. The address of the new law firm and where it will operate from, and
3. The proposed name of the new law firm accompanied by the letterhead (clearly setting out the details of all practicing legal practitioners within the law firm) and business cards. 

Now that’s a handful (and a half).

Or so it seems….. 

Keep in mind that with the legal profession being regulated by the LPC, all attorneys need to comply with the Legal Practice Act and its Rules together with the prescribed Code of Conduct in order to operate not only squarely within the ambit of the law (which makes perfect sense as a practitioner thereof) but also in order to be successful in all endeavours going forward – no one needs a statutory hurdle to overcome when things finally get going. 

But once that’s all done and dusted – it’s onwards and upwards for you!

I mean, you have “just got to put these wings to test”

There is help if you need it! 

Look we know that this is a lot of information and it may feel overwhelming.

Breathe.

Because remember that you do have resources to turn to, such as –

1. For the enrolment of your new law firm – contact the Legal Practice Council  
2. For the completion of the legal practice management course – contact L.E.A.D
3. For queries about the application for a Fidelity Fund Certificate – contact the Legal Practitioners Fidelity Fund or the Legal Practice Council. 

We acknowledge that the above statutory requirements are not the only things you will need to have in order to operate a new law firm. There are other basic business considerations and tips that may help you on your way. 

You see, operating a law firm is essentially the same as operating any new business. 

Tune in next week when we will tackle those together in Going out on your own – Part Two. 

The above high-level information is not to be considered as legal advice in any manner or form and should be used for information purposes only. For further information on the above processes please get in touch with the professional bodies as listed above.

Written by Alicia Koch on behalf of AJS