The note includes guidance on handling trust accounts
The New Zealand Law Society | Te Kāhui Ture o Aotearoa has released a practice note on the closure of law firms.
The organisation urged practitioners who are looking to retire, go through with a merger or stepping away from practice to ensure that they have implemented plans for handling trust accounts and clients' wills and deeds.
"It is particularly important to communicate with affected clients promptly so that they can make decisions about what to do next and so that they know where any documents you hold will be held in the future", the Law Society said in a media release. "Practitioners winding down a practice also need to have a clear plan about how current and stored client files will be dealt with".
The organisation outlined the following steps for closing down a trust account in compliance with the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 (Trust Account Regulations) and the Lawyers and Conveyancers Act (Lawyers: Practice Rules) Regulations 2008:
A Law Society Inspectorate member must also conduct an exit review prior to a trust account's closure. Moreover, all ledger balances must be resolved and transactions related to client funds must refer back to instructions or statutory/court authority, unless they involve repayments to clients such as in the case of refunds.
Fees may only be deducted from client funds if there is proof of authority and an invoice has been issued. The Lawyers and Conveyancers Act (Trust Account) Regulations 2008, regulation 12(7) also required the disclosure of the contact details of owners of inactive balances if a firm has reported all balances at least every year.
"Closing a practice involves numerous tasks, including storing records, relocating deeds, dealing with client files (open and stored), withdrawing from trusteeships, and resolving all client balances in the firm’s trust account. These tasks require time but are essential to ensure that your clients’ interests are protected", the Law Society said. "In the inspectorate’s experience there are a number of sole practitioners who are unaware of the full range of duties and tasks required upon closure or the necessary lead times. If you are considering closing your trust account, you must address these issues promptly".
The full practice note can be accessed here.
