Bronwen Still and Derek Mitchell of the Solicitors Regulation Authority examine what the new business management rule in the Solicitors Code of Conduct means for the profession


From 1 July 2007, when the new Solicitors Code of Conduct comes into force, you will need to comply with a new rule 5, ‘Business management in England & Wales’. The existing rule relating to the management and supervision of a solicitor’s practice, practice rule 13, will be repealed.



These questions and answers are a brief introduction to the new rule. They are not a substitute for reading the rule itself and its accompanying guidance. You should also see rules 23 (application) and 24 (interpretation).



What are the main features of the new rule?

There are three key elements:

l Every practice must have at least one person (a principal, director or member) who is ‘qualified to supervise’.

l The principals (or directors or members) must put in place arrangements to ensure the proper supervision and management of the practice as a whole. In particular, these arrangements must address those areas specified by the rule. This is more specific than the current rule.

l The principals (or directors or members) must have a system in place for supervising the work done for clients. This is a new requirement.



PERSON ‘QUALIFIED TO SUPERVISE’

Will all of the principals (or directors or members) in the firm need to do management training?

No. This seems to be a common misconception. The rule requires a practice to have only one person who is qualified to supervise. To fulfil the role, the principal (or director or member) must have been entitled to practise as a lawyer for at least 36 months within the past ten years and have completed 12 hours’ management training.



Does this mean there is no need for existing firms to do anything on this score, bearing in mind that they will already have a person fulfilling that role?

Not necessarily. The transitional provisions under the current rule 13 mean that in some firms the person fulfilling the role of the principal/ director/member ‘qualified to supervise’ has been able to do so, despite not yet having done the necessary management training. However, this will not be possible under the new rule. Every person fulfilling the role will need to have done the management training, so beware – if your firm is one of those which has been relying on the transitional provisions, you will need to take steps to remedy the situation before 1 July.



Is the requirement for 12 hours of management training an on-going obligation?

No, this is a one-off requirement, so if you have already done the 12 hours’ training, you will not need to do it again under the new rule. Similarly, if you have previously done some management training, albeit not the full 12 hours, this will still count towards the 12 hours. Any training you do does not have to be accredited with continuing professional development (CPD) hours.



What types of training will meet this requirement?

The Solicitors Regulation Authority is keen that solicitors should undertake the management development which is most relevant to them and their practices. The new rule is deliberately non-prescriptive, so as to encourage solicitors to undertake training and development which they feel will help them in running their practice.



If you attend or have attended management course stage 1 (the seven-hour course compulsory for those in their first three years following admission) as well as management course stage 2 (the additional part, which lasts for a minimum of five hours), that will satisfy the requirement. If you have attended the previous compulsory management course, ‘Best practice’, you will have satisfied six hours of the requirement and need to undertake a further six hours. Even the half-day compulsory course on practice management – run by the Law Society from 1987 to 1989 – will satisfy three hours of the requirement.



Try to think laterally and broadly about the training or development you might undertake which will count for the purpose of the requirement. Types you might consider include:

l Courses on personal as well as practice management, including courses, for example, on time management or personal effectiveness;

l Courses on supervision skills, for example satisfying the Legal Services Commission requirement;

l Distance-learning courses that are assessed or require work to be done (for example working towards the Management Charter Initiative Competences);

l MBAs;

l Courses that deal with management issues in the context of specific legal work, for example supervising a family law practice – depending on the course covering significant management issues rather than substantive law;

l Audio-visual training, but only if there is an interactive element. For example, interactive computer-generated management development programmes will count; and

l Watching videos on management topics, as long as there is group discussion on the topics raised.



Remember: the courses or programmes do not have to be accredited with CPD hours to satisfy the requirement.



Unless the course or programme you are thinking about taking is unusual and outside the mainstream type of management training, it should not be necessary to check with the SRA that it counts before starting. If you do need guidance, call SRA professional ethics on 0870 606 2577. For information on providers of management training, call SRA Information Services on 0870 606 2555.



What about branch offices?

The new rule does away with the requirement for every office of the practice to have a solicitor who is qualified to supervise. You must ensure that arrangements are in place for the effective management of the practice as a whole, including all the offices of the practice.



However, within that framework, the day-to-day supervision and management of an office can be delegated to any suitably experienced and competent employee.



For further guidance on this, see the guidance notes accompanying rule 5. It is important to bear in mind, though, that the onus will be on the principals to demonstrate that the firm’s arrangements for supervision are adequate. The more offices you have, the tighter your supervision and management arrangements may be expected to be.



Are there any particular requirements for staff who work outside a conventional office?

No. Rule 13 caused a lot of problems in determining what constituted an ‘office’ for the purpose of the rule. However, the requirements under the new rule do not hinge on whether you or your staff work from an office, but apply irrespective of where you or they happen to be working. Your arrangements will need to take account of this. See notes 11 and 12 of the guidance accompanying the rule.



ARRANGEMENTS FOR THE PROPER SUPERVISION AND MANAGEMENT OF THE PRACTICE

Does the term ‘arrangements’ have a particular meaning under the new rule?

No. The term is intended to cover any procedures, systems or processes put in place to ensure that your practice is properly run. These do not have to take any particular form and it is up to you to determine what is appropriate for your type and size of firm. However, to satisfy the rule, you should ensure that:

l Your arrangements include a mechanism for their periodic review to ensure their effectiveness; and

l You can produce evidence that the arrangements are actually in place and are operating.



Further guidance on this is in the notes accompanying the rule.



What are the particular areas which the arrangements must cover?

These are listed in rule 5.01 (1). Some of them will be obvious (such as identifying conflicts, controlling undertakings, complying with the requirements of the Money Laundering Regulations), but others may be less so (for example, the need to provide for financial control of budgets, expenditure and cashflow, or the management of risk).



Most well-run firms will already have procedures in place dealing with these areas. They are considered to be particularly important in ensuring that obligations to clients are met. By requiring firms to deal with these areas in a systematic way, it is hoped they will avoid the disorganisation and muddle which is often a hallmark of those cases which end up before the Solicitors Disciplinary Tribunal. It is therefore important to read the rule and the accompanying guidance carefully.



SUPERVISION OF WORK

What does the new rule require?

You will need to put in place a system for supervising all aspects of the work undertaken for clients – including the handling of client money. Your system will also need to make provision for checking the quality of that work on a reasonably frequent basis. Again, the rule is not prescriptive and it is up to you to determine what will be right for your type of firm, but you must be able to demonstrate, if required, that your procedures comply with the rule.



Does the supervision have to be done by a solicitor?

Not necessarily, but it must be by someone within your practice who is suitably experienced and competent. The point of the requirement is to ensure that the person supervising has enough knowledge and experience to spot any problems with the quality of the work being done by the person for whom they are responsible, but they may not need to be an expert in that particular field.



What if we have staff who work from home or in a virtual office?

The rule applies wherever your staff happen to be working, and your system will need to take account of this.



IN-HOUSE SOLICITORS AND LAW CENTRES

Does this rule also apply to solicitors or registered European lawyers (RELs) who work
in-house?

Parts of the rule will apply in certain circumstances. See rules 5.01(2); 5.02(1)(e) & (f) and 5.03(2) & (3). Essentially:

l Rule 5.01(2) applies to you only if you are employed as the head of your in-house legal department (which includes a law centre). The rule requires you to put certain arrangements in place for the management and supervision of your department, although these are limited to supervising the staff working under you, controlling undertakings and identifying conflicts.

l Rule 5.02(1) applies to solicitors and RELs who are employed in law centres. It also applies to solicitors and RELs who are employed in other sorts of in-house legal departments, but only where those departments employ solicitors and/or RELs who, as part of their employment, either undertake publicly funded work, or exercise any right of audience or the right to conduct litigation (or supervise such rights) when acting for members of the public or advising them.



The rule requires these types of in-house practices to have one solicitor or REL who is ‘qualified to supervise’. The purpose of this requirement is to ensure that there is at least one person responsible for running the law centre or in-house department who has the right kind of experience. You therefore cannot work in a law centre or an in-house legal department to which the rule applies if it does not have a solicitor or REL who is ‘qualified to supervise’, unless the SRA has granted a waiver of the rule.

l Rule 5.03 applies to you only if you are fulfilling the role of ‘solicitor or REL qualified to supervise’. See ‘Supervision of work’ above for more information.



Bronwen Still is head of policy and Derek Mitchell policy executive at the Solicitors Regulation Authority’s professional ethics department



Understanding the code

l The code can be accessed via the Solicitors Regulation Authority’s website – www.sra.org.uk. It will be updated on a three-monthly basis.

l The printed edition of the code is priced at £29.95 and can be ordered from Prolog (Law Society Publishing’s distributors), tel: 0870 850 1422.

l The Companion to the Solicitors Code of Conduct, written by Peter Camp, provides commentary and guidance. It will be published in August and is priced £34.95 (discounted to £29.95 if ordered together with the code before 31 August via Prolog).

l The SRA’s professional ethics guidance team is available, tel: 0870 606 2577, to help with enquiries.

l The Law Society has designed an online training course to help lawyers understand the code and get up to speed on the impact of the changes that it will introduce. The course is accredited for two hours of continuing professional development by both the Law Society and Bar Council and is priced at £60 + VAT for individuals, discounted by £10 if booked before 1 July. Group discounts are also available. To register and pay, go to www.lawsocietycpd.org.uk.