Question of ethics archive

Important: The guidance below was written and issued before the introduction of the SRA Handbook on 6 October 2011, and may refer to regulatory material that is no longer in effect. Although it may still be relevant, this guidance has not been rewritten in light of the wide-ranging regulatory changes implemented on 6 October 2011. Accordingly, it has been archived.

March 2010

Unqualified employee running separate business

Q. We employ a paralegal who is proposing to set up a will writing business which she will run outside of her employment with us. Since we do not provide this service, we have no objection and would aim to support her by referring any clients wanting a will to her new business. Is there any objection to this?

Yes. One of the changes brought about by the Legal Services Act is that with the exception of rule 15, the Solicitors’ Code of Conduct 2007 now applies to unqualified members of staff (see rule 23.01(1)(d)). This means that an employee who wants to provide solicitor-type services through a business which is not a lawyer’s practice must consider the provisions in rule 21.

Rule 21.02 lists certain core legal services which cannot be provided through a separate business, and this includes will drafting. Your employee cannot therefore have a separate business offering this type of service.

On the question of referrals generally, you must comply with rule 9 and in particular, rule 9.03 when referring your clients to another party or business which is not a lawyer’s practice. In particular, any referral or recommendation must be made in good faith, judging what is in the client’s best interests. In each case, you would have to consider very carefully whether it is in the best interests of a client to be referred to an unqualified person or an unregulated business for legal services.

Complaints procedure and third parties

Q. We are acting for a defendant in civil proceedings where the applicant is a litigant in person. The applicant is not happy with the way we have conducted the proceedings and is asking for details of our complaints procedure. Do we have to deal with his complaint?

No. Rule 2.05 of the Code does require you to have a written complaints procedure – and to act in accordance with the procedure - but this is for the purpose of dealing with any complaint made by your client. If the litigant in person believes you have acted in breach of the Code, then it is open to him to make a complaint to the SRA for investigation.

Sole practitioner incorporating practice with wife

Q. I am currently a sole practitioner, but want to incorporate my practice. My wife has worked in the practice for many years, albeit that she has no formal qualifications. Can I set up the company with my wife as a co-director and shareholder?

Rule 14 allows a non-lawyer to become a director of a solicitor’s corporate practice only if he or she has first been approved by the SRA as a non-lawyer manager (see rule 14.06(1)).

You can apply to the SRA for approval of your wife as a non-lawyer manager, but bear in mind that there is a further restriction in rule 14.01(3) which means that non-lawyer managers cannot make up more than 25% of the number of directors. Your wife could therefore only be appointed as a director if there were three other directors (including yourself) who were lawyers.

Under rule 14.06(2), an individual who has been approved by the SRA as a non-lawyer manager may become a member or shareowner, but only if that individual is also a director of the company. Once again, you would need to have regard to the restrictions in rule 14.01(3)(b – e), which requires at least 75% of the ultimate beneficial ownership, number of shares and voting rights to be in the hands of practising lawyers.