Practice Resources

Succession Planning

Unexpected events are a fact of life – lawyers help their clients prepare for unexpected events all the time but are you prepared for the unexpected? If you are suddenly unable to continue practising, what would happen to your practice? And your clients?

The way to mitigate the consequences of a sudden illness, impairment, disability or death is to develop a succession plan. All lawyers, especially those practising alone or in a small firm, should take the time to develop a succession plan for their practice and, most importantly, have one in place before it is needed.

While succession planning is often associated with closing your practice, it is just as important for unexpected life events. In addition to taking care of the ethical and professional obligations you owe to your clients, a succession plan supports your family as well as your staff, partners and associates because it gives them direction on how to carry the heavy responsibility of handling your practice when you are no longer able to do so.

Without a succession plan, the Law Society will likely seek to have a custodian appointed under the Law Society Act, 1999 in the event you can no longer practice. A custodian is appointed to take possession of clients’ property and ensure the protection of their interests. In such circumstances, the Law Society’s focus will be on the protection of the public and not on maximizing value for your practice or estate.

This article is a short overview of some of the things to consider when putting together a succession plan. You may also wish to consult resources and sample documents relating to succession or contingency planning prepared by Law Societies in other jurisdictions such as the Law Society of British Columbia, the Law Society of Alberta and the Law Society of Ontario.

If you are planning to close your practice or are aware in advance that you will be away from your practice for an extended period of time, more information – including a list of your responsibilities to the Law Society – can be found in the resource Closing Your Practice.

GENERAL CONSIDERATIONS

One of the goals of a succession plan is to alleviate stress for those that are managing your practice for you – it gives them a map for how to deal with your practice. It also gives you control over how well your practice, and by extension your reputation, will thrive in your absence. The following considerations should underscore a succession plan:

Who will succeed me if I can no longer do the work? Will my partners or associates be able to take over? Should I arrange to have a replacement lawyer step in if I am unexpectedly absent?
How can I provide a seamless transition for clients and everyone else who deals with my practice?
How can I minimize disruption to my family in the event of an unplanned absence from practice?

WHAT GOES INTO A GOOD SUCCESSION PLAN?

A good succession plan includes, at a minimum, the following:

1. Power of Attorney and Will

An up-to-date power of attorney and will are important keys to ensuring that your clients’ interests are protected if an unplanned absence occurs or you pass away. They can also help to reduce the time between the unexpected event and the time it takes to get your practice back on track. Here are some things to keep in mind with respect to your power of attorney and will:

Both your power of attorney and your will should contemplate practice-related issues.
When selecting a power of attorney, keep in mind that certain tasks in your practice must be completed by a lawyer in good standing (e.g. sign trust cheques).
Some banks and financial institutions are particular about the contents of a power of attorney and will not honour them without certain requirements. Consider having your financial institution review your power of attorney in advance to help prevent issues from coming up later. Your bank may also have suggestions on what can be done now to make it easier for it to authorize a person who is acting on your behalf or on behalf of your estate to access your accounts or manage the business side of your practice.
Review your power of attorney and will on a regular basis to ensure that they are appropriate, complete and up-to-date.
Pay special attention to corporate requirements if you practice as a Professional Law Corporation (PLC) (e.g. whether a corporate resolution is required in certain circumstances) and make sure they are addressed in your power of attorney and will.
Consider obtaining appropriate life, disability insurance and business interruption insurance policies. You may be able to mitigate a loss of earning power, even after you return from an unplanned absence, as well as the costs of hiring a replacement lawyer to cover your practice.

2. Identification of a Replacement Lawyer

A replacement lawyer will step in for you if you are unable to practice due to injury, impairment or disability. Identifying a replacement lawyer and putting an agreement into place with him or her is especially important for sole practitioners and lawyers practising in small firms because there are often fewer firm-wide systems to pick up the pieces when unplanned events occur. Keep in mind the following when selecting a replacement lawyer:

You can choose anyone to be your replacement lawyer (partner, associate, friend), but keep in mind that a non-lawyer is not permitted to complete certain tasks that are inherent to a law practice (e.g. sign trust cheques).
Choose your replacement lawyer wisely. This person will be running your practice in your absence – they will deal with your clients, have access to your accounting records and bank accounts, etc.
If your replacement lawyer and the person named as your power of attorney for your practice are different, consider how this arrangement will work.
Discuss with your replacement lawyer all aspects of your practice – for example, compensation, who should handle files, whether files should be transferred to other lawyers, whether the replacement lawyer can hire new staff or give raises, whether the replacement lawyer can wind up or sell your practice in the event of a prolonged impairment, how should clients be told that about your absence, what should the lawyer do in the short, medium and long term.
Put discussions with your replacement lawyer in writing. Review the agreement on a regular basis to ensure that it is complete and continues to be appropriate.
Pay special attention to corporate requirements if you practice as a Professional Law Corporation (PLC) (e.g. corporate resolution for the replacement lawyer to act in your stead), and discuss them with your replacement lawyer and include them in your agreement.

3. Office Manual

An office manual doesn’t need to be a fancy document but it should contain lots of information and be easily accessible to those who need it. Here are some considerations when drafting yours:

The following information is useful and should be found in an office manual:
- Contact names and telephone numbers along with relevant information for those people that help make your practice run smoothly, such as staff, suppliers, landlord/leasing/property company, service providers (e.g. IT, telephone company, cell phone provider) and banks.
- The names and contact information for the people who should be contacted if you are no longer able to practise.
- Instructions on how to produce a current client list, including contact information.
- Instructions on how to access your limitations diary, bring forward system and any other calendaring system you use.
- A list of ongoing obligations of the practice.
Ensure that the office manual sets out the key aspects of your practice. When determining what a key aspect of your practice is, ask yourself whether someone who knows nothing of your practice would need to know information about that aspect in order to walk in and continue your practice.
Use plain language when writing your office manual – it could be another lawyer, staff member or family member who needs to understand it.
Review your office manual on a regular basis to make sure it is complete and accurate.

4. Good Practice Management

Good practice management skills are invaluable when you are able to practice, but they are even more helpful when unexpectedly you can no longer practise. Here are some practice management skills that will serve you and your practice especially well in your absence:

Keep your files and your practice organized – it will always be easier and quicker for someone to step into an organized practice.
Explain in your retainer or engagement letter that a replacement lawyer may need to step in if you can no longer practise and have your client sign an authorization (either in the retainer or engagement letter or otherwise) consenting to a replacement lawyer acting in your stead.
Keep your billings and accounts up-to-date.
Make sure that your limitations diary, bring forward system and calendaring system are all up-to-date. In addition, make sure you aren’t the only one who understands how they all work.
Document all of your work, client conversations, meetings, etc. in sufficient detail. The goal should be that anyone could pick up one of your files and know what is going on and what needs to be done.

5. Communication

Having a power of attorney, will, replacement lawyer agreement, office manual and good practice management skills are great, but the element that ties a succession plan together is communication. Keep in mind these considerations:

Make sure your family, staff, associates and partners are aware of the arrangements you have made.
If you have a replacement lawyer, introduce him or her to your staff, associates and partners.
Ensure that the office manual is easily accessible and those that would need to consult it know where it is.

If you have any questions about succession plans, please contact the Director of Practice Management.

Links:

Closing Your Practice

Related Topics:

Non-Practising Membership: rule 2.19 (Law Society Rules)

Changes in Association of Practice: rule 2.20 (Law Society Rules)

Unclaimed Trust Funds: section 70.1 (Law Society Act, 1999)

Confidentiality: section 3.3-1 [5] (Code of Professional Conduct)

Preservation of Clients Property: section 3.5-1 to 3.5-7 (Code of Professional Conduct)

Client’s Property: Part III (Law Society Act, 1999)

Closing, Storing and Disposing of Client Files

Clients