April 27, 2020Back to Latest

“I would say it is safe to assume that it could be between 30 per cent of the population — that acquire COVID-19 — and 70 per cent.”

– Govt. of Canada Health Minister Patty Hajdu

If you or one of your colleagues are among the many Canadians who contract COVID-19, the consequences to your practice and clients could be long-lasting and profound.

If you become unable to practice due to illness, there are professional implications that you should consider. This includes frozen trust accounts, critical steps being missed on files and significant financial issues.

In the face of COVID-19, the need for contingency planning has never been more urgent or important.

Begin with a Plan

Contingency planning has three important elements:

1. A written agreement with a replacement lawyer who could step into your shoes should something happen to you.
2. An Enduring Power of Attorney.
3. A Will.

The first step is to find another lawyer to manage your practice until you are able to return to work or to close it if you are unable to.

Your replacement lawyer should have the power to withdraw funds, write cheques or even close your accounts. You should choose your replacement lawyer carefully and build in safeguards such as requiring second signatures on cheques or having your accountant provide more oversight than usual over your practice. Be mindful that your replacement lawyer will have a major impact on whether clients choose to stay with you in the future or go elsewhere. Also, ensure the lawyer you choose is in good standing with the Law Society or they may not be able to help you when the time comes.

While office staff, accountants and bookkeepers can provide support, the ethical rules that govern the practice of law require that your replacement be a lawyer.

Consider the many things you do that make up ‘practising law’ and ask yourself how they would be handled in your absence. These include things such as:

• Contacting clients.
• Making arrangements to handle and transfer files.
• Hiring staff and paying salaries.
• Contacting the Law Society and your bank.
• Collecting fees.
• Winding up or selling your practice.

These arrangements can be as detailed as you prefer but should always be confirmed in writing. This will protect both you and your replacement from misunderstandings and enable others (clients, bank managers, the Law Society, landlords, office personnel) to share information and give your replacement access to your practice if you are not able to do so yourself.

Another crucial step is to make pre-arrangements with your bank to give your replacement signing authority on your accounts and access to safety deposit boxes.

You should make these arrangements with the assumption that you will not be there to guide the replacement lawyer, staff or family through these difficult decisions. Your future judgment may be compromised so there is no time like the present to put these important measures into place.

Custodianship

The Legal Profession Act gives the Law Society broad authority to apply for a custodian ‘to have custody of the property of the member and to manage or wind up the legal business of the member.’

If this becomes necessary, the custodian’s primary purpose is to protect your clients’ interests rather than the value of your practice.

Custodianships are expensive. Since these costs are paid by your practice, this can further reduce its value and create additional debt for you or your estate.

If you have a replacement lawyer in place to handle your practice when you cannot, it is considered an informal custodianship arrangement.  The Law Society’s Custodianship department will provide guidance to that lawyer without charge.

Notify Your Clients

It is important to let your clients know in advance that you are looking out for them.

Explain that a replacement may step in to work on their file if you are unable to act. Your clients will appreciate knowing that you are thinking ahead and protecting their interests.

Trust Accounts

Your replacement lawyer will oversee your accounting records and assume responsibility for ensuring that your practice continues to comply with the Law Society’s trust accounting rules.

The Law Society of Alberta will have to approve them as an Alternate Responsible Lawyer for your practice. You can do this in advance by filling out this form on our website.

Other Considerations

It is hard to capture everything you should do in contingency planning into one short article but here are some additional tips:

• Organize your office to make it easier for your replacement to keep your law practice moving forward. This step will reduce the amount of down time and increase the value of your practice should it have to be sold.
• Keep your files organized and your accounting up to date.
• Assemble your bank and contact information for staff and suppliers, office and file procedures, computer access instructions, directions about how to produce a list of your clients and an aged accounts receivable report. Put this information where your replacement can easily access it.
• Use one central calendaring system that includes all important appointments, court appearances, closings and ‘bring forward’ dates for all active files.
• Introduce your replacement lawyer to your staff and suppliers in advance and make sure they know how to reach each other. This will give your staff comfort and confidence in working with your replacement in the case that you become unavailable.
• Ensure to keep enough money in your practice’s general account to enable your replacement to pay staff, rent and other overhead while your affairs get straightened out. Keep your timekeeping up to date so your replacement and staff can collect sufficient receivables to sustain the practice.
• Consider whether you have adequate disability and life insurance and who the beneficiaries are. Consider purchasing insurance for amounts sufficient to cover operating costs and making the proceeds available to your replacement.

Enduring Power of Attorney

Your bank will need something in writing before they hand over your accounts to your replacement lawyer.

Some banks have their own power of attorney forms. Be aware however that many of these forms grant unconditional signing authority and include provisions to indemnify the bank.

Get written confirmation in advance that your bank will honour your version. Otherwise, your replacement and clients may be surprised when the time comes, and they are denied access to your accounts.

Your Will

In the face of COVID-19, this is a scenario every lawyer must contemplate, regardless of their age.

Without a Will, your family may disagree about who should be the executor of your estate. There may be other delays that interfere with probate and your family and practice may incur needless expense, frustration and delay trying to sort out your affairs.

To avoid this scenario, it is critical to have a Will naming an executor to administer your estate, including your law practice. Discuss the arrangements you have made with your executor and replacement lawyer.

Help is Available

For more information, templates and precedents that you can download without charge and adjust to fit your individual circumstances, see the Business Continuity and Succession Planning Guide and Checklist on the Law Society website.

You can also contact the Practice Management Department for help with all of your practice and technology-related problems and solutions and the Law Society Practice Advisors for confidential advice.

When to Start Your Contingency Planning

Don’t put it off—start today.

 

Written by: Len Polsky, Manager, Practice Management