LESSON ONE
1.1 Introduction.
Once
admitted to the Bar, an advocate in Kenya has various options to which he can
apply the legal knowledge and skills acquired in training. As such, not all
advocates will enter legal practice as private practitioners, some may practice
law as salaried employees of an institution that provides legal services, as
state prosecutors, a state counsel, as an advocate employed by a corporate
entity, as a lecturer or, some may become company secretaries, legal officers
of particular organs of state etc.[1]This
class focuses on legal management in theory and practice and as guided by the laws
in Kenya. It seeks to analyze legal management and how best it can be used to
meet the goals and objectives in any law practice.
1.2 Definition of
Legal Management
There
is no definite definition of legal management. However, for the task herein, we
will adopt a conceptual definition of the term.
The word legal, means of, relating or falling within the province of law
or established by law.[2] On the other hand,
management entails the aggregate of activities that would be required to be
done in order to open and to operate successful legal practice. As such legal
management in this sense is seen as a means to an end, the end being; to
produce the desired results in law practice and eventually to legally operate
successful law practice. Of specific concern is management of the legal
practice by private practitioners. Further, a comparative study will be
conducted with respect to those practicing as state attorneys and their
management system.
1.3 History of legal
management
The legal profession has its roots
in Rome and Greece. In Rome, there were the juriconsult
who acted as legal advisors of the Roman people and the patronus causurum (patron)
who appeared in courts to defend the cause of their client. The patron in
providing legal services did not, at the beginning, receive any pay for their
services since the same was considered inappropriate and an abomination.[3] At this particular time practitioners did not practice in organized
offices nor was there any law that imposed obligations upon them. This system
later graduated into the English system of Barristers and Solicitors and then
consequently the more organized system of law firms.[4] Historically, law firms
didn’t invest significant time and energy on strategic plans. They devoted less
effort to strategic planning. They paid lip service to planning rituals, and tended
to be more reactive than proactive in the way they conducted their business.[5] One writer, Daniel B.
Evans, on why lawyers did not have regard to management attributed that to the
kind of education received in law schools. He indicates that, lawyers were led
to believe that what they are learning is very important, very difficult, and
very special. That as a matter of fact, the study of law has engaged some
brilliant minds. He proceeds to state that the decisions of courts,
constitutions and statutes framed by lawyers, have changed the course of
nations, major corporations, and the rights and lives of most citizens.
Consequently, to the lawyers, every other profession or occupation becomes less
important, less difficult, and less special thus making it difficult for
lawyers to have respect for, or consult with, professional managers.[6]
Lately,
however, firms are beginning to apply more rigor and discipline to the task of
measuring and managing the performance of the firm. They realized that there
was a need to not only understand the clients’ legal needs but also understand
their business and industries at a deeper level and that the objective of the
firm should be to run the firm like a business not as a collection of billable
legal experts.[7]
Remarkably,
and particular to Kenya, the transplantation of the Advocates Act of England
into Kenya and the acquisition, by Kenyans, of the English system of legal education
saw the beginning of a new era in the legal field. Further, the formation of
Law Society of Kenya, laid down a platform through which legal practitioners
can be managed. For instance, they have promulgated the Advocates (Practicing)
Rules, Advocates (Accounting) Rules, the Guidelines on Etiquette and
Professional Conduct etc. All of these have various prescriptions on, how
advocates should carry on their practice. The Advocates Marketing and
Advertising Rules touch further on management. Consequently, firms are
beginning to apply more rigor and discipline to the task of measuring and
managing the performance of the firm. They have realized that there was a need
to not only understand the clients’ legal needs but also understand their
business and industries at a deeper level and that the objective of the firm
should be to run the firm like a business not as a collection of billable legal
experts.[8]
1.4 Importance of
Legal Practice Management
The importance of legal management
cannot be overemphasized. First, while it is always emphasized that the legal
profession principal purpose is public service, it is untenable to state that
legal practice, like all other business enterprises, can be run without making
profits. Management is the tool towards effectiveness and profit maximization by
law firms. Second, management looked at in light of the laws surrounding it is
a tool that can be utilized to ensure compliance with the laws of the
land. For instance, keeping of accounts
is a statutory requirement which if not properly done attracts legal sanctions.[9]
Third, through management, a roadmap of legal infrastructure required to
support the activities of the firm, ranging from competent and skilled
manpower, updated library, departmentalized litigation areas, stationary,
scheme of service and capacity building for employees among others is created. Therefore,
practice management should be an integral part of any law practice.
ESTABLISHING
A LAW FIRM
2.1 Introduction
Establishing
a law firm requires both deep thought and organization.[10] It is prudent that an
advocate who seeks to open a law firm outlines a structure or plan of how to
ensure that both establishing and running of the firm is successful from the
word go so that by the time he opens his doors to his first client, nothing holds
him back. An advocate before making a decision, therefore, to the effect they
want to run a law firm, there are various measures to be put into
consideration. Of focus herein are choosing the nature of business organization
to adopt and the means of registering the same, procuring a practicing
certificate. The same are enumerated and expounded upon below;
2.1.1 Procuring a Practicing Certificate.
The
qualifications required of an advocate to practice are prescribed by the
Advocates Act.[11]Upon
admission as an advocate of the High Court, the advocate is required to apply
to the registrar of the same court to be issued with a practicing certificate.[12] The application is made
in duplicate, signed by the advocate and it is to contain such as, his name and place of business, and the date of his
admission as an advocate[13];
There are several things that must accompany the
application for a practicing certificate. First, there is must be evidence of
payment of prescribed fees to the Law Society of Kenya and the Advocate’s
Benevolent Association which is an organ of the Law Society of Kenya whose main
objective is to collect contribution from LSK members for supporting advocates'
dependents in the event of their demise.[14] The applicant is required to
complete two copies of a statutory declaration to accompany the application
(attached herewith) and return the same with two separate cheques in favour of
the Law Society of Kenya and the Advocates’ Benevolent Association to the
secretary of the Law society of Kenya. Second, he must present a written
approval from the President of the Law Society of Kenya to the effect that
there is no objection to the issuance of the Certificate.[15] Third, it must be accompanied by a
duly filled Accountant’s Certificates form filled by a qualified accountant who
has examined the advocate’s accounts as expounded upon herein below. There is
no requirement for such certificate for first time practicing certificate
applicants.[16] The fourth is a Statutory
Declaration form. This is so that the applicant can prove that they have
complied with the provisions set out in Section 9 of the Advocates Act. Fifth,
and with respect to advocates who are not first time applicants, they must
present evidence of having completed at least five units of Continuing
professional Development or the evidence of exemption thereof. [17]Lastly, there must be evidence of
payment of the advocates Professional Indemnity Cover.[18]
The
registrar upon satisfaction that the applicant’s name is on the Roll of
Advocates and that he is not suspended from practice issues the applicant a
practicing certificate which authorizes applicant to practice.[19] A practicing certificate
is valid from the date of issuance and expires at the end of the practicing
year. As such, therefore, upon expiry, the advocate to be qualified must apply
to the registrar for renewal of the practicing certificate.[20]
There
is a rebuttable presumption that the appearance of a name of an advocate in a
list maintained by the registrar for the purpose of current practicing certificate
holders is evidence that such advocate holds such certificate.[21]
Where an advocate does not
have in force a practicing certificate, he is unqualified to practice
as advocates.[22]
Section 31 of the Act states in mandatory terms that such person should not
institute, carry on or defend any suit or other proceedings in the name of any
other person. The section proceeds to set out the consequences of breach of
that provision. First, he is guilty of contempt of court, second, he is not
capable of maintaining a suit for costs. Once the advocate has a current
practicing certificate he can proceed to open a law firm.
2.2Factors to Consider when Establishing a Law firm
Some of the key factors to be put into
consideration include;
2.2.1 The Nature of Business Association.
An
advocate wishing to practice in a law firm may do so either as a sole
proprietor or in a partnership which partnership can either be ordinary or
limited liability.
Sole
Proprietorship
Where
it is a sole proprietor, ownership and control of the business rests with a
single individual. Owner is not separate from the business and has sole
unlimited personal liability for the business, its debts and contractual
obligations, and any claims against it. Regulation for sole trader is minimal
for instance no requirement for a formal constitution for the business and etc
, and it is easy to register.[23]It should be registered in
accordance with the Registration of Business Act.[24]
The
procedure for registering a sole proprietor entails conducting a names search.
One will need to write a letter requesting for a name search to be performed on
his behalf. This can be done at the Huduma Center or at the Company Registry at
Sheria House. The cost is usually Kenya Shillings One Hundred (Kshs.
100/=).Thereafter, if the business name is available for registration it is
reserved after which he proceeds to register within a period of about twenty
eight days. reserved. The applicant will fill a BN/2 form, pay Ksh.600, in
which the form will list; nature of business, postal address, principal place
of business, age sex, names of the applicant. On register receiving this
information, he shall proceed to register the firm. At this point he shall
issue the firm with a certificate of registration in form BN/3.
Partnership
Partnership can be defined as the
relation which subsists between persons carrying on a business in common with a
view of profit. Just as registering a business, the partnership will have to
apply to be registered[25].
A partnership can be either ordinary of limited liability. The
process outlined above for registration of a sole proprietorship applies while
registering an ordinary partnership. However, the statement of particulars must
be signed by all partners or by one partner, if verified by a statutory
declaration made by the signatory.[26]
As regards a limited liability
partnerships, they must be in writing and they must be registered.
An application for registration is submitted to the Registrar of Partnerships.[27]. Accompanying the
application for registration is the name of the proposed name[28] of the Partnership which
name should not be undesirable or similar to that of another limited
partnership[29].
Where the name is available a reservation is made for two months upon payment
of a fee of Kenya Shillings One Hundred. Thereafter, a statement in a FORM LLP1
accompanied by a fee of Kshs. 10,000/= signed by each person who proposes to be
a partner of the proposed LLP containing the name of the partnership, the
general nature of the proposed business of that partnership, the proposed
registered office, the name, identity document if any, nationality and usual
residence of each person who will be a partner of the partnership is to
accompany the application for registration. The application is considered and
if approved a certificate of registration is issued in the form of Form LLP2.[30]
Limited
Liability Partnerships are recommended as the liability of partners in relation
to debt obligations of the partnership, like a company, is limited to their
capital contribution and the partnership it as juristic person, able to sue and
being sued.[31]The
downside however is the increased regulation by the law. For instance in
accounting matters as will be demonstrated hereinbelow under the Finance topic.
2.2.3 Tax
remittance and other Statutory Deductions.
In addition, it is mandatory that
the said firm also apply to the Kenya Revenue Authority for a Pin Certificate
to ensure that it complies with the law as to paying taxes. It is also required
that it register itself with relevant mandatory statutory requirements like the
NHIF and NSSF (to ensure that they and their employees remit the statutory
deduction in the course of their business operations as mandated.
2.3 Location
Choosing
a suitable location of a law firm is very important. An advocate should have
regard to various factors. The First factor is the subsisting local and
national laws. The Physical Planning Act regulates users of land. The County
Government will ordinarily have local plans which prescribe what can be or
cannot be done in a particular area. Therefore, an advocate would want to
scrutinize such plans to ensure that they permit commercial activities in the
proposed office location. [32]
Second,
the advocate should consider the existing laws especially County Government
ones. The laws subsisting at one particular time may attract or drive away
target clients. For instance an advocate, after deciding he want to do
Conveyancing would want to locate his office in a place where land rates and
rents are lower thus likely to attract many transactions.
Third
is safety and security. The location should be one that ensures both the
employees and visiting clients are not exposed to danger. As such, it owes a
duty to his visitors in respect of the dangers due to the state of the premise
or the things done or omitted to be done on them. This imposes a liability in
tort to the firm.[33]Further, it needs to
ensure the safety, health and welfare at work of all employees.[34] This applies to all
employees whether temporary or permanent.[35]
Fourth is accessibility. The firm must be placed strategically to that ensure it is easily accessible visible and has access facilities such as good roads, banks, courts etc.
RUNNING A LAW FIRM
Role of human
resource in the running of a law firm; legal provisions applicable,
recruitment; placement, induction;, advertising, record and record management;
policy formulation .
3.2 HUMAN RESOURCE MANAGEMENT
It
has been argued, and rightly so that human resource is the key resource that an
organization could have. As such, organizations, while dealing with staff,
ought to have in mind that they are people who need to be managed as they are
potential assets rather than merely a variable cost.[36] Human Resource Management
aims to ensure that the organization obtains and retains the skilled, committed
and well-motivated workforce it needs.[37]Human Resource Planning
ensures that there is adequate quantity and quality of employees at any particular
time. It also enables one to forecast the firm’s future staff needs vis-a-vis
the already existing ones, compare the needs with the financial ability of the
firm then plan for how the needs will be met.
In
the initial stages, an advocate, depending on his financial muscle may operate
alone with few staff as are necessary, for instance a secretary and a clerk.
However, as time goes by and as his practice grows, there grows with the
practice the demand for more human resource. One of the ways to meet staff
needs for a new firm is to recruit, properly select and deploy the staff so
recruited. As such, he has to list the
positions, skill and time needed for each position[38]. The advocate should
further have in place a management plan which will outline the policies the
staff will abide by, financial packages intended to compensate them and also a
clear forecast of how it is intended for the law firm to adapt to changes. The
plan should also include a foreseeable staffing growth and how the same will be
accommodated[39],
as well as plans for expansion as and when the right time comes.
Dealing
with human resource requires a realization that they are people, first of all,
thus subject to the constitutional right to fair labour practices and the right
to fair remuneration.[40] In that regard, he should
ensure that he doesn’t oppress them and that the remuneration given reflects
the relative worth of their work.
In
the recruitment process further, he is to ensure that all applicants are given
a level playing field without according any preferential treatment to some to
the disadvantage of others. This is because all persons have the right to
freedom from discrimination on whatever grounds.[41] This position stands even
during the continuance of the employment. As such, any policy or practices that
promotes equal opportunities to all employees in respect of recruitment,
training, promotion, terms and conditions of employment and should not be
discriminatory.[42]As
far as remuneration is concerned, he ought to pay his staff equal remuneration
for work of equal value at which failure he is guilty of a criminal offence.[43]
Upon recruiting, the advocate like any other
employer is required, by the Employment Act to give written employment
contracts to all employees whose contract is of or exceeds three months.[44]Such contract is then
signed by the employee and it should specify the job description of the
employment and the remuneration and any other benefits.[45].
Further,
he is required to ensure that any form of sexual harassment whether in form of
direct or indirect requests for sex, language or sexual nature, material of
sexual nature or physical behaviour that’s of sexual nature, is unheard of
within the firm. In the event that he has twenty or more employees, he should
issue a policy statement[46] on sexual harassment
after consultations with the employees or their representatives.[47]
3.3 Advertising
Upon establishment or during the
course of an advocate’s practice, an advocate needs to make known, to the
public, of his existence. This is so because, as a legal services provider, he
needs to attract clients. One of the ways of attracting clients is through
advertising, referrals from other advocates, use of letterheads etc.
Concerning advertising, the case of Okenyo
Omwansa George & Another vs Attorney General & 2 Others, held
that in line with Articles 46(1) and 48 of the Constitution;
advocates have a right to advertise. It is from such decisions as the one above that the Law
Society of Kenya, seeing the need to take into considerations the need to
maintain the standards of the services offered by the legal profession and
still operate within the bound of the law, promulgated the Advocate
(Advertising and Marketing) Rules, 2014. These rules prescribe the extent to
which advocates can advertise or market as herein under discussed.
The
Rules prohibit for an advocate to, whether directly or indirectly, apply for or
seek instruction for professional business, do or permit in the carrying on of
his practice anything which can reasonably be regarded as calculated to attract
business unfairly.[48]
Advocates being members of this profession are to ensure that their advertising
does not Advocates being members of this profession are to ensure that their
advertising does not demean the profession as a noble profession. Thus it is important that firm does not
compromise itself when it comes to advertising. It must abide by the set out
rules of the Law Society of Kenya.
3.4 Record
and record management
3.4.1 Records.
A
record refers to all information created, sent and received in the course some
activity or activities, duty or transaction. Records provide a point of
reference in the course of the transaction or task being engaged in, be it in
an organization or in a personal capacity.[49]Article 35(1) of the
constitution stipulates the importance of keeping records in relation to access
of information. Furthermore section 74 of the Employment Act requires an
employer to keep truthful records of employees[50]
3.4.3 Record Management
It
is defined as the practice of maintaining the records of an organization from
the time they are created to the end of the life cycle or disposal[51]. In relation to record
management, the organization should create a retention policy to ascertain as
to how long such records are to be kept and when to dispose of them. Especially
concerning public records, as guided by the Public Archive Act, Cap 19 ; Laws
of Kenya. The firm must also know in which format such records are to be kept,
for example, in hard drives, physical files, depending on the sensitive and
access to the same. Only a few personnel should be able to retrieve such
records to avoid compromise. As such records should be under lock and key
(passwords where necessary).
FINANCE
The
accounts in a law firm; legal provision therein, insurance, and the various
insurance policies taken by law firms.
4.2 Accounting
Accounting
entails the provision of financial information of a business through financial
statements and reports.[52]
It is a legal requirement that advocates must keep accounts in the course of
carrying out the business of legal practice and the advocate should submit a
duly certified certificate to the Council of the Law Society of Kenya stating
that a registered accountant has examined the books, accounts and document of
the advocates’ law firm.[53]
The
Accountant should not have been at any time during the accounting period, or
subsequently, before giving the certificate, become a partner, clerk or servant
of such advocate or any partner of his. Additionally, he should not have been
disqualified for some other reason for instance through a finding of guilt by
the Institute of Certified Public Accountants of Kenya for professional
misconduct or discreditable conduct.[54]
Before
signing the accountant's certificate an accountant should: make a general test
examination of the books of account of the advocate; ascertain whether a client
account is kept; make a general test examination of the bank pass books and
statements kept in relation to the advocate's practice; make a comparison, as
at not fewer than two dates selected by the accountant, between the liability
of the advocate to his client as shown by his books of account the balance
attending to the credit of the client account; and ask for such information and
explanations as he may require arising out.
If
after making the above investigations it appears that there is evidence that
the Advocates (Accounts) Rules have not been complied with, the Accountant, is
obliged to make such further investigations as may be necessary to enable him
to sign the certificate.[55]
However,
there are categories of Advocates who are exempted from the delivery of the
certificate, they include:-Advocates who hold their first current practicing
certificate. Advocate who after having ceased to hold a current practicing
certificate for twelve months or more and has not held client’s money, holds
his next current practicing certificate and an Advocate who delivers to the
Council of the Law Society of Kenya a statutory declaration stating that the
Advocates (Accounts) Rules did not apply to him because he had not practiced on
his own account either alone or in partnership or held or received client's
money during the period to which the declaration refers.
Upon
a delivery of the certificate or the statutory declaration, the Secretary to
the Council of the Law Society of Kenya is supposed to issue a certificate to
the Advocate.[56]
failure to produce an advocate’s certificate or statutory in lieu therefore is
professional misconduct.[57]
4.3 Types of Accounts kept by Lawyers
4.3.1 Client Account
The
Advocate Act[58]
defines a ‘client’ as a person who has power to employ or retain an advocate
and has exercised that power or a person who would be liable to pay advocate’s
costs. The person does so as a principal. Under the Advocates (Accounts) Rules, an advocate is
required to maintain an account separate from that of their own or of the firm
known as a Client Account[59]
in which all transactions relating to client’s finances are recorded.[60]
He has the discretion to keep one or several client accounts as he thinks
necessary.[61]
Into this account, the Advocate is supposed to pay all clients’ money without
delay.[62]
If a cheque drawn by the firm on a client account is dishonoured, professional
misconduct is disclosed and disciplinary action will follow against the law
firm.[63]
Money
into the client’s account can only be paid as provided for under the Rules.[64] Client’s money includes that which an
advocate receives on account his client is for disbursements, is meant for
maintenance of the client account, is from a spilt cheque, is meant to replace
money wrongly withdrawn from the client’s account.[65]Withdrawal of money from
the client’s account can only be done if expressly authorized by the Rules or
with the authorization of the Council of the Law Society of Kenya upon
application by the advocate.[66] the express ways are;
money towards the payment of professional fees to the advocate upon delivery of
the bill of costs, any erroneous deposits, to transfer the money to another
account opened on behalf of the client and a withdrawal authorized by the
client[67]
This
restriction in depositing or withdrawing from the Client’s account is meant to
ensure that the Advocate doesn’t deal with the client’s account and finances or
make secret profits. The Advocate is required to keep proper books of Accounts,
including cash books or ledgers, in respect of every client. In the event of
destruction or damage to such records, he is required to inform the Council
indicating the circumstances under which the event being reported occurred.[68]
In instances where the money accrues interest, The Advocate (Deposit Interest)
Rules[69]
provide that the advocate is not liable to account to any client for the
interest in respect of moneys received held for his clients generally.[70]Conversely,
where the money, in respect of a specific client or specific matter in respect
of a specific client, is held in a separate designated account, the Advocate is
liable to account for the same.[71]
4.3.2 Office Account
Office
account is used by lawyers to keep money in relation to running the affairs of
the office. It may also hold profits accrued from the business of running a law
firm. Office account is opened in the name of the law firm.
4.3.4 Partnership Accounts
All
partners in a law firm need to understand what a partnership is all about in
terms of sharing profits and losses, liabilities attaching, dissolution among
others. When running a Partnership, keeping of accounts largely depends on whether
the partnership is an Ordinary or Limited Liability Partnership. With the
Ordinary type, keeping of accounts is not much regulated by statute. As such,
the Partnership Act provides that any one partner is
bound to render true accounts and full information of all things affecting the
Partnership to all others or their legal representatives.[72]
Concerning
a Limited Liability Partnership, it is mandatory that it keeps such accounting
and other records at such place as the partners consider fit. Such records
should be sufficient to explain the transactions and financial position of the
partnership and also enable the preparation of a profit and loss account and a
balance sheet from time to time so as to give true and fair view of the state
of affairs of the partnership.[73] In addition, accounting
records cannot be disposed off before the expiry of seven years after
completion of the matters to which such records relate.[74]
Monies
with respect to the running of the affairs of the office and profits accruing from
the running of the firm, whether sole proprietor or a partnership, should be
deposited in an office account opened in the name of the firm.[75]
4.4 INSURANCE
4.4.1 Insurance Policies Applicable In Law Firms
With
reference to law firms insurance policies are applicable to protect the
practice against the impact of risks which may arise in the course of business.[76] There are several
insurance policies that an advocate may take up as hereunder;
4.4.1.1
Professional Indemnity Cover.
Every
advocate planning on practicing on his own behalf is required to purchase an
insurance policy known as a Professional Indemnity Cover. This is a precondition before one is issued
with a practicing certificate[77] .The purpose of the cover
is for compensating clients for loss or damage with respect to any civil
liability or breach of trust to which the advocate or his employees may be
subject to. The value of the cover at any particular time is not to be less
than one Million Kenya shillings.
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