01 - Setting Up a New Firm

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SETTING UP A LAWFIRM


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WHAT IS A LAW FIRM

A Definition(1) A law firm is a business unitwholly owned by lawyers comprising lawyers of varyingdegrees of expertise andexperience , together with supportstaff . By cooperating with eachother and with clients , these peoplemust achieve the firms businessobjectives .


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Those objectives are to match the legal andmanagerial know-how within the firm toclients needs for legal services , and to deliver

those services , in such a way that economicand other benefits result both to clients and tothe law firm. Decisions about the businessobjectives to be followed, and the way in

which they are realised, will together createand reflect the firms mission, culture andvalues. (Making Sense of Law Firms, Strategy,Structure & Ownership, by Stephen Mayson, page533)


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(2) A law firm is a business entity formedby one or more lawyers to engage in thepractice of law . The primary service

rendered by a law firm is to advice clients(individuals or corporations) about their legalrights and responsibilities, and to representclients in civil or criminal cases (or shariahcases), business transaction, and othermatters in which legal advice and otherassistance are sought (Wikipedia)


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HOW TO START A LAW FIRM

To decide first what is the entity of law firmThere are several categories of businessentities.But to operate a law practice in Malaysia,there are two types of law firm entities i.e:

(1) Sole Proprietorship(2) Partnership


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BUSINESS ENTITY OF A LAW FIRM

(1) Sole ProprietorshipThe proprietor runs the business, personallyreceives all profits, and is personally responsible

for all losses and liabilities of the law offices(2) PartnershipThe partnership legal structure allows two or

more attorneys to associate themselves togetherand to share in the profits or losses of thebusiness. All the partners are jointly andseverally liable for the actions of the firm and for

the debts of the partnership


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PARTNERSHIP: THEPARTNERS ROLE

To manage effectively a person mustunderstand his or her role within theorganization as well as understanding the

structure and mechanics of the organizationitself and the legal environment in which thefirm operates.


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(1) Partners as owners

Partners do not need to be reminded that they own thefirm.The fact of ownership should not, however, be the

rationale for making management decisions. A firststep towards developing sound management policiesis to separate ownership from management as part ofthe decision-making process.

Good management decisions follow from researchingthe problem, understanding the issues, consideringthe alternatives and determining the decision to betaken; the management process is not inexorablylinked with the fact of ownership .


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(2) Partners as policy-makers

A partnership should operate as an effectivepolicy-making body. Management withinprofessional practices has tended to be a

reactive process.In many practices the firms policy is oftenunstated and unclear.Reactive management, fire -fighting theproblems of the day with limited attention beingpaid to strategic planning, has often been themodel for professional practice management.


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(3) Partners as managers

Solicitors see themselves as professionals providing aservice to their clients, they do not see themselves asadministrators.It is the perception that time spent on administration andmanagement is second class which has meant thatsome firms have not developed to their full potential.It is important for partners to draw a distinction between:(a)management of the delivery of professional servicesto the client, and(b) management of the business aspects of the firm.


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Management of the business aspects of the practicecan, however, be appropriately delegated.In many of the larger practices it may well be that oneor more managers are employed to administer anddevelop the business aspects of the firm.Typically such appointment include a finance manager,an administration manager, a personnel manager, aninformation technology manager a training manager.Few practices, except the largest solicitors firms, canafford the overheads of employing such levels ofmanagement expertise.


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Effective management requires strategic planning.When a firm adopts a proactive approach topractice management, i.e it plans and takes

decisions in a positive way rather than simplyreacting to particular circumstances, policy-makingand strategic planning play a crucial part in thefirms development.

Partners inevitably take on a new role as policy-makers rather than simply reacting tomanagement problems caused by poor planning.


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(4) Partners as fee-earners

Practice management must not detract from the primarypurpose of the firm, the provision of professionalservices to clients.Management should compliment the fee-earning work of

partners and professional staff. All too often, due to pressures created by the volume offee-earning work coming into the firm, little attention ispaid to management issues, thus creating a repository of

long term problems. All partners should seek to ensure that this does nothappen. They should allocate some of each workingweek to their own particular role in practice

management.


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THE SPECIAL NATURE OFPARTNERSHIP

Why Partnership works?Partnership works for professional servicefirms because it is the optimal method of

balancing the competing claims of three setsof stakeholders:(1) Professionals,

(2) Owners, and(3) Clients


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(1) Professionals

Professional expect and enjoy high levels of personalautonomy within their working environment.Professionals seek opportunities to self actualize (i.eto pursue personal fulfillment) by taking onassignments which they find intellectually rewarding,or which satisfy their altruistic impulses. Maximizingincome is not necessarily a professionals primaryobjective.

A sociological perspective suggests that partnershipis an effective governance mechanism for deliveringthe degree of autonomy required to motivate seniorprofessionals.


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(2) Owners

A property right perspective emphasizes that in aprofessional service firm it is not clear who owns themost critical assets, the fee earners or theshareholder. The key income-generating assets areexpertise, client relationship, and reputation.These may be proprietary to individuals and mayrepresent a potentially significant source of powerand income for these professionals.When they key income-generating assets areproprietary to individuals, they should share in theownership of the firm and participate directly indecision making. this implies a partnership form ofgovernance


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(3) Clients

When clients approach a professional service firmthey may not fully understand the nature of theirproblem and cannot sample the firms service priorto purchase.This puts the professional in a position ofconsiderable power relative to the client.The clients trust of the professional will be based

on a complex set of factors, such as personalrelationship and organizational status orreputation, but the partnership form of governancehas traditionally represented an important source

of reassurance.


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MANAGEMENT STRUCTURE

IMPLEMENTING AN EFFECTING MANAGEMENTSTRUCTURE The management structure which a firmadopts depends upon a wide range of factors, some of whichare:

(a) Ownership the division of equity in the firm(b) Size the size of the practice(c) Policy the devision of responsibility between partners inorder to put into effect the firms policy.

(d) the skills of individual partners.(e) Personalities the particular interests, likes and dislikes ofindividual partners.(f) Training can a particular partner be trained to undertakespecific responsibilities, eg implementation of informationtechnology in the firm?


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There is no standard format for the structureof a solicitors firm. The largest practices, require a developed

and complex management structure.The management of a small firm is obviouslyless complex.

A medium-sized practice may well centralizethe administrative functions in one post, thepractice manager or administrator.


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THE LEGAL TEAM

The Legal team consists of attorneys,administrators, and clerk.(1) Attorney

Attorney counsel clients regarding their legalrights, represent clients in litigation, andnegotiate agreements between clients andothers.

Attorney counsel consists ofpartner/shareholder, Managing Partner,

Associate Attorney, Legal Assistant, etc


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(2) AdministratorsLaw office administrators are responsible forsome types of law office administrative

systems such as general management,finance and accounting, human resources,marketing, or computer systems.


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(3) Clerk All staff who support the lawyers in theprovision of legal services to clients, but who

do not usually have direct fee-earning contactwith clients.It includes administrative staff, secretaries,receptionist, telephonists, messengers,librarians etc


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PROCEDURE TO SET UP OF A NEW FIRM

Legal Profession Act 1976, RULE 7.06:Setting Up of a New Firm

(1) Any individual or individuals who wish(es)to set up a legal firm either as a soleproprietor or partnership shall inform the BarCouncil in writing of his (their) intention to doso. This notice in writing must be executed bythe intending sole proprietor or all theintending partners.


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(2) The said notice shall contain the followingparticulars:(a) Proposed name of the legal firm in

accordance with s85 of LPA 1976, (b) Proposed address of the new firm,(c) Proposed date of commencement of

operation of the new firm,(d) Proposed telephone, fax numbers & e-mail address of the new firm.


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(3) The approval of the Bar Council isrequired for the proposed name of the newfirm.

(a) In the event that the proposed name isalready a registered name of another legalfirm or is not in accordance with s85 of LPA1976, the Bar Council will issue a letter ofobjection to the proposed name. Theintending sole proprietor or partners shall berequired to submit a fresh name for approval.


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(b) In the event that the proposed name is not aregistered name of another legal firm and is inaccordance with s85 of LPA, the Bar Council will issuea letter of no objection to the proposed name subjectto compliance with the following requirements:-(i) The intending sole proprietor or partners is/are inpossession of current and valid Sijil Annual andPractising Certificates (if applicable); and(ii) The intending sole proprietor or partners has/haveobtained the required Mandatory ProfessionalIndemnity Insurance cover for the new firm.


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(c) Upon the issuance of the letter of noobjection by the Bar Council, the new firmand its particulars shall be recorded in the

Bar Council Membership Department systemaccordingly.


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MANAGING THE LAW FIRM

(1) Law Office Accounting and Finance(2) Human Resources: Planning, Recruitmentand Selection

(3) Human resources: ProfessionalDevelopment and Appraisal(3) Clients and Communication Skills

(4) Ethics and Malpractice

01 - Setting Up a New Firm

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