- Incorporated legal practices (‘ILPs’) are increasingly popular as a law practice structure in NSW.
- Establishing an ILP can be a time-consuming process. However, sorting out all the legislative and administrative aspects well ahead of time is a worthwhile exercise, as there are some major pitfalls that can adversely impact practitioners’ professional responsibilities, set up costs and start dates.
The Legal Profession Uniform Law (NSW) (the ‘Uniform Law’) prohibits an entity from engaging in legal practice in New South Wales unless the entity is a ‘qualified entity’. A law practice is included in the definition of a qualified entity and an incorporated legal practice (‘ILP’) is also a qualified entity as it is included within the definition of a law practice (Uniform Law, s 6).
ILPs have been allowed in New South Wales, largely in their present form, since the commencement of the Legal Profession Amendment (Incorporated Legal Practices) Act 2000 on 1 July 2001.
To reach the first limb of the definition of ILP as set out at Part 1.2 of the Uniform Law, an entity must be a company as defined in s 9 of the Corporations Act 2001. The company must:
- provide 14 days’ statutory notification to the Law Society of NSW (‘Law Society’) of its intention to engage in legal practice in Australia and that notice must be still operative; and
- have at least one Australian legal practitioner who holds a principal’s practising certificate AND is also a director of the company – in accordance with the definition of principal in s 6 of the Uniform Law;
The definition of ILP also specifies that the legal services the company provides or proposes to provide must not:
- be limited to inhouse legal services for the company or a related entity of the company; or
- be services that are not legally required to be provided by an Australian legal practitioner and that are provided by an officer or employee who is not an Australian legal practitioner.
Establishing an ILP – some practical tips
ILPs are becoming increasingly popular as a law practice structure in NSW. For example, in October 2019 there were 2,831 active ILPs registered on the Law Society’s records. In August 2020, the Law Society’s records show that there are now 3,010 active ILPs registered.
Establishing an ILP can be a time-consuming process. Devoting some time to sorting out all the legislative and administrative aspects of establishing an ILP well ahead of time has, for many practitioners, proven to be a very worthwhile exercise. This is the case not only because there is much to consider but by fully understanding the process of establishing an ILP, practitioners are better able to avoid some major pitfalls that can adversely impact on their professional responsibilities, set up costs and start dates.
Notification – get the timing right
One of the most common pitfalls practitioners face when establishing an ILP concerns the legislative timing requirement. Before engaging in legal practice, prospective principals of ILPs must ensure their company provides at least 14 days’ notice of its intention to engage in legal practice. The statutory notice must be provided to the Law Society in accordance with s 104(1) of the Uniform Law and rule 28 of the Legal Profession Uniform General Rules 2015 (‘Uniform General Rules’). Note: This is a strict statutory obligation and the Law Society has no power to reduce this period.
Regrettably, many practitioners overlook their obligation to provide at least 14 days’ notice on behalf of their company. In these circumstances, the company or the practitioner cannot provide legal services for prospective ILP clients including, for example, taking instructions, attending court, receipting or disbursing trust money, witnessing documents or taking and receiving affidavits, until the statutory notification period has been discharged.