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  • The Process of Winding Up
The Process of Winding Up

Review the information on the topics below to learn more about the process of winding up.

Setting the Effective Date

The key to winding up safely and effectively is to determine the date you want to make your transition, then map out your timelines. We encourage having adequate time between each step to accommodate necessary processes and unanticipated events.

For instance, you cannot announce your retirement to your clients and assume they will all arrive the next day to pick up their files. Nor can you assume that you can wind up various existing matters, send out accounts on files and get paid all within a month or two. Instead, consider setting target dates for certain steps in the process, such as declining all new work and rendering final accounts.

Key Law Society Dates

The Law Society has certain key dates that you may want to consider and include in your retirement timeline. If you don’t build in adequate time for each of these steps, you may have to pay additional membership fees or insurance while you address the different aspects of winding up your practice.

Membership Fees & Indemnity Levy

You may wish to set your effective date around the payment deadlines for membership fees and indemnity levies. In this way, you might be able to avoid paying the entire amounts. Consider if you have any surcharges as well.

Professional Corporation

Advanced planning around your professional corporation is required. The Legal Profession Act (sections 131(3)(g), 131(4) and (5) and 132(1)) requires professional corporation permit holders to be active members of the Law Society. When you change your status from active, the permit is revoked and the professional corporation has to be dissolved. There is a grace period of 90 days from the date of your membership status change or to December 31, whichever comes first.

Limited Liability Partnership (LLP)

There are certain steps to complete if you are a partner in an LLP and are moving away from active, indemnified status. The Membership department will walk you through these processes.

Articling Students

If you are a principal to an articling student, articles are terminated if you go inactive, retire or resign. Therefore, should you choose to change your status prior to the end of the articling term, you must ensure that you and your student-at-law are able to locate a new principal, who is approved by the Law Society, in order to successfully transfer the articles.

Firm Obligations

Consider your firm obligations including those regarding a partnership or practitioners with whom you are in association.

If You Have a Trust Account
Sole Practice – Complete Wind up

If you operate a trust account and are changing your membership status from active to inactive or retired, you must close your trust accounts before your status change can be approved. All balances must be remitted to the client or, with the consent of the client, trust money must be transferred to another lawyer (who may be assuming carriage of the matter). If you have undisbursable funds in trust, you will need to address that appropriately.

Your final requirements for dealing with your trust accounts will be determined by the Trust Safety department based on your engagement with them. To close the trust account, however, you will need to provide confirmation (ideally a letter or similar statement) from the financial institution confirming that the trust account is closed.

You will need to also do your final Accounting Upload and Self-Report.

You may keep your general account open after you change from active membership status to inactive status. This will allow you to continue to bill and receive payment for files on which you worked.

Sole Practice – Transition to Successor Lawyer

If you have a successor lawyer assuming your practice, they will have to be designated as the Responsible Lawyer on the trust account for the firm. If they do not already have their own trust account, they will have to apply for Responsible Lawyer status. Their application will be considered by the Trust Safety department. This process takes time and the applicant may not be successful so have an alternate plan in place.

Partner or Associate of a Firm

If you are the Responsible Lawyer for the firm and the firm is continuing after your retirement, you will need to address who will take over the trust account and Responsible Lawyer duties for the firm. Again, this should be managed with sufficient time for an application for the Responsible Lawyer designation to be considered.

Your Open Files

Once you have decided on your retirement date, you should also decide when you will stop taking on new clients. This can be difficult, but it is necessary for you to deal with the requirements of winding up. While it may be difficult to turn away work from loyal clients, departing during an open and active file is unfair to the client, who must then pay to bring a new lawyer up-to-speed.

It takes significant time and effort to wind up your practice. Reducing the number of files is essential to focus on the work you need to do both on the matters and on your retirement. Some lawyers who are planning to retire do it over a year or two by gradually reducing their client load and their work week.

Prepare a Master File List

Take inventory of your open and active files and create a Master File List. It should set out the opening date, money in trust, next steps, key dates ahead and what should be done with the file (i.e. if the client will take the file to another lawyer or if you need to refer it elsewhere).

Memo Active Files

It is helpful to memo your active files to assist new counsel. You should set out the nature of the file, remaining work to be done and note any important deadlines such as limitation dates, questioning and hearing dates. Not only will new counsel appreciate it, but the memo will make it less likely that an error will occur as new counsel assumes their role. This may help prevent indemnity claims and complaints.

Consider Appropriate Notification to Clients

You will need to contact all clients with active files. Let them know:

  • you will not be able to continue to act for them and that they need to retain another lawyer;
  • how and when they can pick up their file;
  • if possible, the contact information of another lawyer who might be able to take over their file;
  • any limitations or other important dates; and
  • any steps they need to take on their file.

Have your client sign an authorization to transfer their file, corporate seals, record books and trust funds, if applicable, to their new lawyer, if they have one. If they pick up their file, have them sign an acknowledgement confirming receipt. If they do not retrieve their file or tell you what to do with it, give them the contact information of the lawyer or custodian who is responsible for holding their file and any money or other property you were holding in trust for them.

When you leave practice, it is important to understand who owns the content of your files. For a more detailed review of this issue, please see the Law Practice Essentials File Retention and Disposal module.

Consider whether, and how much, of a client’s file you wish to copy before releasing it. You cannot charge your client for making your copy. Contact the Practice Advisor’s Office if you have any questions.

If there are imminent dates on matters, you should address next steps with the client and the client’s new lawyer. You may need to seek instructions to obtain adjournments or extensions, or you may need to make arrangements to get off the record after consulting with the client. You should address whether you need instructions from your corporate clients or builders’ lien holders regarding change of address or records.

Consider whether you have any ongoing obligations, such as undertakings or trust conditions, and make arrangements to fulfil them, be relieved of them or have then transferred to another lawyer.

Notify the Court

When a lawyer ceases practice for any reason, Rule 2.32 of the Alberta Rules of Court states that they automatically cease to be the lawyer of record in any actions before the Court of Queen’s Bench of Alberta or the Court of Appeal. Advise the court and opposing counsel if any previously scheduled questioning, motions or hearings need to be rescheduled. File either a Notice of Change of Representation (Form 3) or a Notice of Withdrawal of Lawyer of Record (Form 4).

Original Wills

Make best efforts to return original wills to clients (and establish a process for doing so). In the event that you are unable to locate the client, then contact the Law Society. It may be possible for the wills to be deposited with another lawyer but this should be noted and recorded. Please see the Ethical Considerations Regarding Requests for Wills resource for more information.

Notices to the Public

You may post notice of your retirement on your website or via news media (this may more be more applicable in smaller jurisdictions). This may help notify clients you have been unable to contact otherwise. Provide information regarding the date of your retirement and identify who should be contacted after that date.

Billings and Accounts Receivable

You must review all your files for time and disbursements then bill them to date. Prepare and send out your final statements of account for work in progress and outstanding disbursements to the date you stop work on the files.

If the billing is on a contingency fee basis, refer to the provisions of the contingency fee agreement relating to the amount to be paid if you withdraw before a matter is completed. If the contingency fee agreement does not provide for this, you should reach an agreement on fees with your client and the client’s new lawyer. Please see the Contingency Fee Issues resource for more information.

Make best efforts to collect your accounts receivable. If needed, make payment arrangements with the client or the client’s new lawyer.

After you transition to inactive or retired status you may still prepare and forward statements of account to collect fees.

If You Have Sold Your Practice to Another Lawyer

If you have sold your practice to another lawyer, consider a transition period for the succession. This may help establish a relationship between your clients and your successor.

The transition period may also be required by your purchase arrangement, as clients have the right to retain new counsel of their choice. Discuss possible conflicts between your clients and any existing clients of the successor lawyer. Consider if you will make arrangements with the new lawyer to collect and remit your accounts receivable or if you will attend to that yourself.

If You Are Leaving a Firm

You likely have a successor at the firm for files and clients. However, you still need to carefully address clients, files and all other aspects of your practice. Again, clients can choose where they want their files to go. Let clients know that you will be leaving the firm and that they can continue to have representation with your firm unless they would prefer to take their file elsewhere. Make adequate arrangements with the firm regarding billings, collection of accounts and remitting the money owed to you. If you have changed your membership status to inactive or retired, you may still render statements of account and collect fees for the work you did while practising.

If You Are Closing Out Your Sole Practice or Your Firm is Disbanding

If you are winding up your sole practice (and have no successor) or if your firm is disbanding, then you need to address the clients and files. At the earliest date, inform your clients of your transition and advise that they will need to retain new counsel. You might refer the clients to other lawyers and also inform them of their right to choose the lawyer they want. Request the clients’ written authorization to transfer their file and any monies held in trust to their new lawyer.

If anyone contacts you or your firm about a file, you must provide the contact information of the custodian or lawyer to whom you have delivered your clients’ files and money, or other property held in trust.

Your Closed Files

Even after you have wound down your practice, if you have retained possession of your closed files you need to manage them according to your Code of Conduct obligations.

Lawyers often call the Law Society to ask how long they are required to keep a closed client file before destruction. While there is no statutory requirement for how long you must retain a closed file, the Rules of the Law Society of Alberta require trust account books and records be retained for at least 10 years. When deciding whether to destroy a file you should consider criteria under limitations legislation, and statutory requirements such as the Canada Income Tax Act, Canada Evidence Act, etc. You should also assess the likelihood of professional negligence claims as well as specific file and area of law requirements.

See the Law Practice Essentials, File Retention and Disposal module for further information.

Your Staff

Your staff may be just as important to consider in the whole process as your family. They may have been with you for years and have their own thoughts and needs. Provide them with advance notice, if possible, as this will ease any stress or apprehension. Be sure, though, to keep vigilant that they are managing their roles and duties appropriately.

Provide your staff with sufficient notice of termination or compensation in lieu of notice, if that is required. Verify the statutory notice requirements pursuant to relevant legislation and the provisions in any employment contracts. Properly manage any benefit plans for your employees. Direct an accountant or bookkeeper to prepare records of employment, calculate unused vacation pay or other benefits accrued, prepare T4 slips and make all necessary remittances to the CRA.

Your Premises, Office Equipment, Subscriptions and Social Media

You need to consider rent and lease agreements at the earliest date (in fact, those dates may be driving your effective date of retirement). Address things with your landlord and, if necessary and allowed, make arrangements to sublet the premises or assign the lease.

If you are not selling the practice, or if your sale does not include office equipment, furniture, etc., perhaps things can be sold or donated to other lawyers, groups or individuals.

Ensure that all hard drives on computers, photocopiers and fax machines (both leased and owned) have been properly wiped of data and, if appropriate, destroyed so that you do not inadvertently breach client confidentiality. Simply deleting files may be insufficient to meet your obligations.

Where equipment has been leased, contact leasing companies to terminate leases and maintenance agreements or to arrange assignments. When neither cancellation nor assignment is possible, you will need a pool of funds sufficient to continue the payment on the leases or to pay them out.

Cancel your subscriptions to reports and journals, both digital and in print.

Send written notification to all suppliers advising them that the practice will be closing. Give them contact information for any future correspondence or interactions.

Deal with other service providers, including public utilities, and be sure to provide them with your updated contact information.

Arrange to have your telephone calls and mail forwarded or monitored by your successor lawyer, if applicable. Consider setting up an auto reply on your email and phone lines that you have retired, the date you retired and give contact information for any further questions.

Update social media profiles to show your current status. Delete those that are no longer necessary.

Remove all firm signage, lock the door and begin your next chapter.

View the other sections of the guide:

  • Making the Decision to Retire
  • Your Status with the Law Society
  • Working Through the Tasks
Printed from https://www.lawsociety.ab.ca on May 21, 2025 at 1:49:02 AM
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                                                                Email: Tribunal Office

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                                                                  Email: Custodianship

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