QUESTION OF ETHICS

Q I am an in-house solicitor and the company I work for will be splitting into several smaller companies.

I will be employed by the holding company.

May I act for the subsidiary companies and can I charge?A Practice Rule 4 provides that you can only act for your employer, subject to the exceptions in the Employed Solicitors Code 1990.

The code provides that an in-house solicitor can act for an employer's holding, associated or subsidiary company.

A subsidiary company has the meaning assigned to it in the Companies Act 1985 and two companies are associated where they are subsidiary companies of the same holding company.

The exception only permits the solicitor to act where there is no conflict of interest, and the solicitor must at outset tell the client he or she is not covered by the Solicitors Indemnity Fund (qualifying insurer after 31 August 2000).

It would not be improper to charge a subsidiary company for work done and Practice Rule 7 (fee sharing) would entitle you to share those fees with your employer.

If the costs are payable by a third party you need to be aware of the indemnity principle and for further guidance on this point you should read principle 4.07 in The Guide to the Professional Conduct of Solicitors (1999, eighth edition).Aide memoirel The new Indemnity Insurance Rules will be effective from 1 September 2000.

Solicitors must have their new indemnity insurance in place by that date.

l Question of ethics is compiled by the Law Society's professional ethics guidance team.

Send questions for publication to Austin O'Malley, the Law Society, Ipsley Court, Berrington Close, Redditch B98 0TD; DX 19114 Redditch; tel: 020 7242 1222.

l The Establishment of Lawyers Directive 98/5/EC was implemented in England and Wales on 22 May 2000.

Lawyers from other EU states who are EU nationals and are established in the UK have to register with one of the UK Law Societies or Bars.

Lawyers already practising in the UK have until 21 November 2000 to make their applications, unless they wish to take advantage of their new rights under the Directive at an earlier date.