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Accounts – accountant’s report

Previously, the Accounts Rules were unclear as to whether a solicitor who held little client money would need to obtain an accountant’s report. The guidance was that a waiver could be obtained if there were only a small number of client money transactions, or if a small amount of client money was held. But, there was no guidance on what counted as ‘small’. This meant each application had to reviewed on an individual basis.

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Partnership – forfeit profit share?

A partner who is in breach of fiduciary duties may forfeit their profit share (as well as having to pay compensatory damages). Similar principles apply to an LLP member. This was confirmed in a recent case where the compensatory damages were £1.5m, but the loss of profit share amounted to £10m.

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Social media – downside

Marketers are always exalting law firms to embrace social media to spread the firm’s brand. As a counter-balance it should not be forgotten that badly judged postings can virtually destroy a brand. For instance, Milton Keynes firm Baker Small specialises in representing local authorities defending claims brought by parents of children with special educational needs. The law firm posted several tweets in which it gloated about defeating some of those claims, but the language used was at best insensitive, and at worst deeply offensive. The end result was extensive adverse publicity (in particular, by social media), with several LAs then deciding to no longer instruct the firm – resulting in it losing over £1m-worth of business. In practical terms, the firm’s brand within that sector has been all but destroyed by its stupid use of social media. [2016] LSG 11 July 19.
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Accounts – interest policy

’Interest paid must be a fair and reasonable sum calculated over the whole period for which the money is held’ (r23.1 Accounts Rules 2011).

All firms should have an ‘interest policy’. While there is no definition of ‘fair and reasonable’, the guidance notes to r23.1 give examples of the factors that will have to be considered when deciding on an interest policy. The amount paid as interest need not necessarily reflect the highest rate of interest obtainable but it is unlikely to be the lowest. Factors to be taken into account will include the sum held; the length of time; the need for instant access; current rates of interest; and the practice of the bank where the account is kept. The end result is that the practice should set an interest rate which incorporates all of these factors, and that should be reviewed on a regular basis to ensure that it is still appropriate.

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Lateral hires – confidentiality risks

Usually, a firm will carry out conflict of interest checks when hiring a senior lawyer or partner from another firm. But, the suggestion is now being made that such checks should also be made with more junior staff (eg newly qualifieds).
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Crowdfunding – CrowdJustice

There are two types of crowdfunding. On the one hand, you can have an equity-based system whereby funders get a financial return if the case succeeds (a model that is popular in the US). On the other hand, there are straightforward donation-based funders (‘pure funders’) who do not get a financial return. Crowdfunding is the modern variation of this, where individual donors make a small contribution, typically as ‘pure funders’.
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Practice valuation – realism

There are some 10,000 law firms that contain four partners or fewer. The average age of an equity partner will be 63. An article in the SJ argues that many still have totally unrealistic expectations of the value of their practices.
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Professional – update

US firm Milbank now pays its first-year newly qualifieds £124,000 (a move that has been copied by several other US firms in London). Freshfields and Clifford Chance pay their newly qualifieds £85,000, while Linklaters pays £81,000). [2016] LSG 13 June 3. Needless to say at the other end of the spectrum, there are job ads for housing solicitors at £27,000pa.
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Solicitor’s file – who owns what?

If the client asks for ‘the file’, what do you have to hand over? The answer depends solely on the concept of ownership – you hand over documents that actually belong to the client, and retain those that belong to you.
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PII – aggregation

The CA has given relatively unhelpful guidance on the interpretation of aggregation clauses within PII minimum terms and conditions.
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