This is the fourth and final part of our published article in Practical Law on closing down a law firm. The full article can be found at www.practicallaw.com and the three previous parts of the article can be found in earlier editions of The LAW.
Prepare for staff transition
The firm should obtain specialist employment law advice on how to treat staff through the sale or merger process.
The firm should be mindful of its obligations to protect staff confidentiality and personal data. The firm will need to share information about staff with the acquirer as part of due diligence and to enable the parties to plan the future staffing structure of the merged firm. The firm will need to consider how it can do so without prejudicing staff confidentiality, particularly as it is unlikely that staff will be aware of what is happening due to the confidential nature of the pre-contractual discussions.
While it is common not to inform staff of a potential sale or merger until late in the transaction (when the parties are certain that it will proceed) to protect confidentiality, staff will need to be informed as required by law depending on the circumstances.
Plan closure notification requirements
In addition to notifying clients and staff of the closure of the selling firm, the firm will need to make formal notifications to the regulatory and other significant bodies with whom it deals. Some bodies will have a standard form for such notifications (for example, the SRA), whereas the firm will need to consider how best to inform others. The firm should identify the bodies who will need to be notified so that none are missed at completion. These may include:
The SRA.
HM Revenue and Customs (HMRC).
The firm’s bank.
Any lenders who provide borrowing to the firm, for example, mortgages over property and other business loans.
Any client companies who may be using the firm as a registered address, particularly if the merged firm will not be operating from the selling firm’s premises after completion.
The Legal Aid Agency and any lenders or other bodies for whom the selling firm was a panel member.
Accreditation or quality standards providers.
The Information Commissioner’s Office.
Any professional directories or websites, telephone directories and so on.
Any referrers who refer work to the firm.
The firm’s IT systems and off-site archiving hosts
The Land Registry, HM Courts and Tribunals Service
Prepare for any operations after formal closure
As a result of the sale or merger, the selling firm will usually set a formal closure date, which is often the same date as completion. The firm can continue to operate after closure to tidy up the loose ends of invoicing clients, for example, returning client money, collecting debts, paying creditors and returning files to clients or to off-site archiving. This can enable the firm to manage these logistics in slower time, without the pressure to complete them before the sale or merger completion date.
Legal services
Be aware that the firm cannot continue to provide legal services after the formal closure date. Activities like applying for registration of title will amount to providing legal services, so the firm should be extremely cautious if it remains operating after closure, and ensure that all staff understand the limits on the work that can be done. The SRA has published guidance on this point (see SRA: Guidance: Closing down your practice).
Stationery and communications
Once the selling firm has closed it is important that any telephone answering service, notepaper which is still being used, emails sent from the selling firm and so on, should clearly reflect the fact that the firm has closed, to avoid any confusion that the firm is continuing to provide legal services.
Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com.
Contact Andy Poole via andy.poole@armstrongwatson.co.uk if you would like assistance with any of the topics raised.
