Question of Ethics
Converting to an LLP
Q. We are in the process of converting our firm from a partnership to an LLP and have just submitted an application for authorisation of the new LLP. Apart from the authorisation aspect, what other issues do we need to address?
The key points to address are as follows:
Notification to clients
Although you do not need to obtain your clients' consent prior to commencing practice through the LLP, you must notify all of your current clients of the change, either before or soon after you commence practising through the LLP.
From a conduct point of view, provided you are not changing any of your terms and conditions, it is not necessary to send a new client care letter to each client, although you will need to satisfy yourself with regard to any legal implications (e.g. in respect of CFAs). You should confirm in your notification to the client that the costs and other client care information previously given will continue to apply.
Where the change in respect of liability is likely to be an issue for a particular client, you should also explain the implications to such clients.
Changes to publicity
You will need to change your letterhead, website and emails to ensure they comply with Outcome (8.5) of the SRA Code of Conduct. In addition, you should consider what changes need to be made to your firm's other promotional materials or any other form of publicity (such as invoices, business cards, directory entries etc) to ensure that they are not misleading once you commence practising through the LLP (Outcome (8.1)).
You may need to take steps (including procedural, where necessary) to inform relevant third parties once you commence practising through the LLP. This may include, for example:
- serving notice of change if your clients are involved in on-going litigation
- notifying Counsel currently instructed on behalf of a client
- notifying agencies such as the Land Registry, the Legal Aid Agency and the Information Commissioner
- Notifying any panel (eg of a mortgage lender) on which you are registered
In addition, you will need to consider what steps are needed to implement the change from a business point of view, such as contracts with employees or suppliers, HMRC, pension schemes and so on.
Closing down your existing firm
If you will be transferring all of the client monies from the partnership to the LLP, the partners must deliver a final accountant's report covering the period from the end of their last accounting period up to the date on which the monies are transferred into the name of the LLP.
The client account(s) of the LLP must be in the name of the LLP as registered at Companies House (rule 13.3(c), SRA Accounts Rules).
For the position if you continue to hold client money (for example, in respect of left-over client balances) in your existing firm’s client account, see the section entitled 'Accountant's report' in our guidance, 'Closing down your practice'.
If you have any queries concerning the above or you need guidance on another matter, please contact the Professional Ethics Team.