LSO seek comments on mandatory succession planning for private practice licensees

LSO survey revealed that 80 percent of licensees do not have estate or business continuity plans

LSO seek comments on mandatory succession planning for private practice licensees
Jacqueline Horvat is LSO treasurer and Megan Shortreed is chair of the Professional Regulation Committee

The Law Society of Ontario Professional Regulation Committee has launched a consultation process to obtain feedback on implementing a mandatory succession planning requirement for licensees in private practice. The proposed plan includes the development of mandatory succession planning criteria, the creation of supports and resources to assist licensees with succession planning, and reporting and enforcement requirements.

On Tuesday’s Convocation, LSO Professional Regulation Committee chair, Megan Shortreed, presented a recommendation from the Trustee Services Working Group to require licensees in private practice to maintain a succession or business continuity plan for their legal services business.

“We need to understand what those licensees feel is a reasonable succession plan requirement — what is feasible? What kind of supports and resources would be helpful? Please let us know,” Shortreed said.

The LSO’s Trustee Services department is responsible for protecting, preserving and distributing client trust monies and property, including files, testamentary documents, or corporate minute books.

The department is primarily engaged where a licensee ceases to practise law or provide legal services but has not made appropriate arrangements for winding up their professional business, for instance, because of death, sudden illness or incapacity, or due to retirement, suspension, or licence revocation and in many of those cases, the licensee’s practise is abandoned.

The Professional Regulation Committee Mandatory Succession Planning consultation report stated that most licensees who become involved with the trustee services department are lawyers. The department found insufficient succession or business continuity planning by licensees, particularly among sole practitioners or lawyers in affiliated cost and space sharing type arrangements.

“Before the law society is able to intervene, clients’ legal interests may be jeopardized, cases may be dismissed, trust funds may be inaccessible, and clients may lose access to their files and other important documents.”

There are approximately 6,000 lawyers and 700 paralegals in small firms of fewer than six lawyers, and the report stated that licensees in those two business structures represent over 50 percent in private practice. “Unfortunately, many of these licensees do not plan sufficiently for suddenly or unexpectedly being unable to continue their professional business.”

The report further stated that over the last decade, the headcount and overall budget of the trustee services have almost doubled, to correspond with a significant increase in trusteeships and that the exact number of licensees who have succession or continuity plans is unclear.

An LSO survey revealed that 80 percent of licensees do not have an estate or business continuity plan, and in a practice review by 468 sole practitioners between 2017 and 2019, 41 percent responded “no” to having a succession plan.

The report noted that running the Trustee Services Department costs approximately $2,000,000 annually. Furthermore, they anticipate that costs will continue to rise as the population ages since older licensees are at greater risk of unexpectedly having to stop practising law or providing legal services due to death, illness or incapacity.

“In line with the overall aging of Canada’s population, the law society has seen a significant rise in the number of sole practitioners over the age of 65. For instance, between 2005 and 2020, there was an increase of almost 240 percent in sole practitioner lawyers over 65, from 618 in 2005 to 2,101 in 2020.”

The LSO encourages lawyers, paralegals, legal organizations and public members to read the recommendations in the report and participate in the consultation between now and November 30. The input from sole practitioners and licensees in small private practice firms is particularly crucial.

“When a licensee is suddenly or unexpectedly unable to practise law or provide legal services, clients with active matters may have their legal interests jeopardized. Court appearances may be missed, real estate deals may fail to close, immigration documents may not be filed, and trust funds may be inaccessible, which may hold up pending matters.”

LSO treasurer, Jacqueline Horvat, said having a succession plan makes good business sense and is in the public’s interest and the best interest of lawyers and paralegals.

 “Having a succession or business continuity plan in place can greatly reduce the burden on the licensee or their loved ones to wind-up a business at a time when they are under great duress while also preserving the reputation of the practice.”

The recommended succession plan requirement specifies information and adequate arrangements to allow for the handling of client property and management of the licensee’s professional business, including obtaining a successor licensee who could step in if the licensee is unable to work suddenly or unexpectedly.

A full suite of resources would support a mandatory succession plan requirement to assist licensees with creating a succession plan, including a plan template, which, if used and completed correctly, will ensure that the licensee’s plan follows the requirement.

“We definitely need to hear from sole and small practitioners during this consultation. Their viewpoint is vital to development of this requirement,” said Shortreed.

The Law Society has not made any decisions about the structure or content of a mandatory succession plan and is open to the suggestions and feedback of all interested parties. Those interested may respond to some or all of the questions in the consultation at LSO.ca/succession-planning.

Following the conclusion of the consultation, the Professional Regulation Committee will review the submissions and determine whether to make recommendations to Convocation.

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