Learning Community Dialogue 1/2012 Allowing Singapore law practices more flexibility to grow and...

Learning Community Dialogue 1/2012

Allowing Singapore law practices more flexibility to grow and enhance

international competitiveness

Mr Alvin Chen Chief Legal Officer and

Director of Representation and Law Reform 7 June 2012

THE LAW SOCIETY OF SINGAPORE

Insert document name


Topics A. Introduction

B. SLPs employing corporate structures

C. Lawyers practising concurrently or accepting executive appointments in related law corporations

D. Collaborations between SLPs and FLs/FLPs

The Law Society Of Singapore 4

Key Dates Date Event 6 Dec 2011 Public Consultation on Legal

Profession (Amendment) Bill opens. 18 Jan 2012

First Reading of Legal Profession (Amendment) Bill 2012.

14 Feb 2012

Second and Third Readings. Legal Profession (Amendment) Act 2012 passed. MinLaw announces policy changes to allow SLPs to become more globally competitive.

1 Jun 2012 Amendments to subsidiary legislation to implement policy changes take effect.


Key Legislative Changes Act /Rules Sections/Rules Legal Profession Act (“LPA”)

130L, 130M & 130W

Legal Profession (Professional Conduct) Rules (“PCR”)

5, 11 & 24

Legal Profession (Law Corporation) Rules (“LCR”)

1A, 10-15

Legal Profession (Limited Liability Law Partnership) Rules (“LLLPR”)

1A, 5 & 10-13

Legal Profession (International Services) Rules (“ISR”)

3A, 4-5, 8-9, 11, 14, 21, 30-31, 33-35, 35A, 37, 39, 40, 41A & Second Schedule


Summary of key changes Rationale: to encourage SLPs to form a related law corporation to benefit from 2 tax incentives:

Development and Expansion Incentive

(Annex A – MinLaw Press Release 31 May 2012)

International Arbitration with Hearings in Singapore (Annex B – MinLaw Press Release 31 May 2012. Note: enhancements wef 1 July 2012)


Concept of “related” New/Subsidiary Existing/Parent

Related

Sole Proprietorship OR

Partnership OR Limited Liability Law Partnership

OR Law Corporation

Law Corporation

Rule 5 PCRRule 1A LCR Rule 1A LLLPR

(1) Shareholder (2) Director,

consultant or employee


Law Corporation (New/Subsidiary)

Law Practice (Existing/Parent)

Required positions

(1) Shareholder Sole Proprietorship Sole Proprietor, Consultant or Employee

Partnership Partner, Consultant or Employee

LLP LLP or Partner, Consultant or Employee

LLC LLC or Director, Consultant or Employee


Law Corporation (New/Subsidiary)

Law Practice (Existing/Parent)

Required positions

(2) Director, Consultant or Employee

Sole Proprietorship Sole Proprietor, Consultant or Employee

Partnership Partner, Consultant or Employee

LLP Partner, Consultant or Employee

LLC Director, Consultant or Employee



Related Sole

ProprietorshipLaw Corporation

S1 SP1, C1 or E1

D1, C1 or E1 SP1, C1 or E1

Sole Proprietorship



Related PartnershipLaw Corporation

S1, S2 S1=P1, S2=P2

D1, D2 D1=C1, D2=E1

Partnership(2-man)



Not Related PartnershipLaw Corporation

S1, S2, S3 S1=P1, S2=P2, S3=P3

D1, D2, C1 D1, D2 and C1 not P, C or E

Partnership(3-man)



Related LLP/LLC Law Corporation

S1 S1=LLP/LLC

D1, D2, C1 D1=P1, D2=P2, C1=P3

LLP/LLC


Special rules applicable to related law corporations Name of law corporation can be similar to related SLP: Rule 10 LCR Concurrent appointments allowed: Rule 12 LCR/Rule 12 LLLPR Confidentiality obligation relaxed: Rule 24(1) PCR read with Rule 11 LCR/section 81E LPA and Rule 10 LLLPR/section 81T LPA Holding of shares: Rule 13 LCR/Rule 11 LLLPR


Possible Issues to Consider Costs of setting up related law corporation (including PI) Better to convert law practice to law corporation to get the benefit of tax incentives? Apportionment of expenses/work for same matter handled by both subsidiary law corporation and parent law practice Extent of benefit of tax incentive(s) Type of work that can be done by a related law corporation


Previous position

Rule 5(1) PCR: Lawyer shall not practise either as consultant or member of more than one law practice.

Rule 11 PCR: Lawyer shall not accept any executive appointment in any company.


Now

Rule 5(3) PCR: Lawyer may practise concurrently in 1 law corporation and another law practice related to the law corporation.

Rule 11(1)-(3) PCR: Lawyer shall not accept any executive appointment in any company other than: - a company of which each shareholder is the sole proprietor or partner of the law firm OR a LLP/LLC OR a partner of the LLP/director and shareholder of the LLC; or - the LLC.


Rationale for new Rule 11 PCR

To allow SLs working in a SLP to hold executive appointments in companies set up by the SLP for related activities e.g. patent agent and other IP related services.


Possible Issues to Consider Company under Rule 11 PCR need not be a related law corporation? If so, no concurrent practice allowed (if company is merely a law corporation)? Can company carry out non-law related activities? If so, still limited by section 83(2)(j) LPA, Rule 10 PCR and Council PDs. Is lawyer holding executive appointment in company still bound by PCR? Meaning of “executive appointment”. PC implications for concurrent practice.


4 categories SLPs which employ foreign lawyers in their local practices

SLPs which tie up with FLPs based overseas

SLPs which tie up with FLPs based in S’pore either through JLV or FLA

QFLPs


Foreign Collaboration Requirements Rule 3A ISR: 1. SL:FL ratio of at least 2:1 2. SL partner: FL partner ration of at least 2:1 3. MP must be SL and at least 2/3 of voting rights in management/executive committee must be held by SLs 4. At least 2/3 of firm’s equity share held by SLs 5. At least 2/3 of voting rights in firm vest in SLs 6. Cumulative amount of payment out of profits by SLP to FLs and/or FLPs during any financial year not to exceed 1/3 of SLP’s profits (1-5: general; 6: profit)


SLPs which employ FLs within their local practices

FLs can take higher profit and equity share in SLP – from 25% to 33%.

FLs with existing approvals to hold up to 25% need to apply to AG for approval to increase holdings to 33%.


SLPs which tie up with FLPs based overseas

FLs within overseas FLP can take higher profit and equity share in SLP – from 25% to 33%. FLP based overseas can also take profit and equity share in SLP up to 33% Concurrent partnerships permitted in SLP and overseas FLP for lawyers who are partners in overseas FLP and granted approval to take profit and equity share in SLP AG’s approval required for all


SLPs which tie up with FLPs based in Singapore

enhanced FLA framework FLs and FLP can take up to 1/3 share of profit and equity of SLP FLs can concurrently be partners in SLP and FLP BUT AG must be satisfied that no actual or potential conflict of interests QFLPs can enter into FLAs with SLPs

AG’s approval required for all


SLPs which tie up with FLPs based in Singapore

enhanced JLV framework FLs and FLP can take up to 1/3 share of profit and equity of SLP both FLs and SLs can concurrently be partners in constituent SLP and JLV BUT AG must be satisfied that no actual or potential conflict of interests QFLPs can enter into JLVs with SLPs

AG’s approval required for all


Possible Issues to Consider Is profit-sharing between SLP and FL/FLP allowed?: see sections 130B(7), 130C(7), 130L(1) & new 130L(6) LPA (overrides Rule 39 PCR). Sharing of client information between SLP and FLP in JLV/FLA: see sections 130B(7), 130C(7) Sharing of office premises between SLP and FLP – Council’s approval required? See amended Rule 9 PCR. Concurrent practice in a SLP and FLP based in Singapore not allowed in non-enhanced JLV/FLA scenarios?

Enquiries

Contact the Representation and Law Reform department at:

[email protected]

Thank You


Learning Community Dialogue 1/2012 Allowing Singapore law practices more flexibility to grow and...

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