The Legal Profession (Amendment) Act

The Legal Profession (Amendment) Bill (the 'Bill') was introduced in Parliament on 23 November 1999. This Bill introduces major changes to the structure of legal practice in Singapore by the addition of two new parts into the Legal Profession Act (Cap 161) (the 'Act'), namely, Part VIA relating to 'Law Corporations' (sections 81A-81O) and Part IXA relating to 'Foreign Law Firms, Joint Law Ventures and Formal Law Alliances' (sections 130A-130J). This article attempts to provide a general overview of these parts. Parliament passed the Bill on 17 January 2000, although the Minister has not appointed a date on which it is to come into force. The Minister is empowered to make rules with respect to Part IVA and Part IXA (the 'Rules') (sections 81N and 130J). However, no Rules have been made at the time of writing.

Law Corporations

Definition

A law corporation is defined to mean a company approved as a law corporation under section 81B, which provides for the approval for law corporations (see 'Application and Approval', below). It is provided that 'company' has the same meaning as in the Companies Act (Cap 50) (clause 12 of the Bill, section 81A of the Act. Please note that all references to sections shall refer to sections of the Act, unless otherwise stated).

Application and approval

A solicitor (defined as an advocate and solicitor who has in force a practising certificate - section 81A) who intends to have a company or a proposed company approved as a law corporation must first obtain approval from the Council of the Law Society (the 'Council') (section 81B). The Council may approve the company or proposed company as a law corporation if the memorandum of association of the company or proposed company provides that the primary object of the company or proposed company is to supply legal services and such other class of services as may be prescribed in the rules made by the Minister pursuant to section 81N (the 'Rules') and in its articles of association provide for such matters as may be prescribed in the Rules (clause 12 of the Bill, section 81B(3). Also, section 81L stipulates that Part VIA and the Rules made by section 81N are to prevail over any inconsistent provisions of the memorandum and articles of association of a law corporation). In the case of a proposed company, any approval given by the Council is only effective when that company is registered and incorporated under the Companies Act (section 81B(4)).

The Council has the power to approve the name or proposed name of a law corporation. No approval shall be given to a name that:

is misleading or detracts from the dignity of an honourable profession;
is so similar to that of an existing law corporation and may thereby cause confusion; or
is inconsistent with any of the provisions of any rules on publicity made under section 71(1) (section 81C).

A law corporation that is a limited company or a private company need not have the word 'Limited' or 'Private' respectively as part of its name (section 81C(2)). However, every law corporation must have either the words 'Law Corporation' or the acronym 'LLC' as part of its name (section 81C(3)). Any change in the name of a law corporation requires the approval of the Council (section 81C(5)).

Directors

Section 75C is amended with the result that it also prohibits a solicitor from practising as a director of a law corporation unless the solicitor fulfills the same conditions which would allow him to practise on his own account or in partnership. However, a solicitor may practise as a director of a law corporation while fulfilling those conditions if at least one of the directors of the law corporation is a solicitor who has been in active practice in Singapore for not less than three continuous years or three years out of a continuous period of five years (clause 10 of the Bill, section 75C(3A)) been employed for not less than three continuous years or three years out of a continuous period of five years.

There is no requirement that all the directors of a law corporation must be solicitors.

Shares and shareholdings

All the shares in a law corporation must be held by solicitors subject to any Rules as to any shares or proportion of shares in a law corporation which may be held by such other persons or class of persons as may be prescribed (section 81H). The Rules may therefore permit persons who are not solicitors to hold shares in a law corporation. No person shall transfer or dispose of any shares in a law corporation except in accordance with section 81H and the Rules (this is subject to any rules made under section 81N). There are other restrictions:

no person can hold shares as nominee for another person (clause 12 of the Bill, section 81H(3)); and
no security can be created over any share (section 81H(5)).

A person holding shares in a law corporation cannot hold shares in any other law corporation, be a director, partner or consultant or an employee of any other corporation, or practise as a solicitor in his own account (sections 81F(3) and 81H(4)). Where a solicitor is suspended or struck off the roll, or has ceased to hold a practising certificate, that solicitor is not allowed to hold shares in a law corporation unless a grace period for the transfer of such shares is granted by the Council (section 81H(7) and (9)). Any transfer or disposal of shares of a law corporation made in contravention of section 81H is null and void (section 81H(8)).

Effects of becoming a law corporation

Private exempt company

A law corporation is deemed to be a private exempt company for the purposes of the Companies Act, notwithstanding the fact that shares in the law corporation are held by more than 20 members (section 81M(2)),1 and shall not be regarded as a public company merely because it has more than 50 members (section 81M(3)). Therefore, a law corporation being deemed an exempt private company is excluded from the scope of sections 162 and 163 of the Companies Act which prohibit a company from making any loan to any of its directors having the requisite interest in the company or to any of the companies in which any of such directors have an interest and the provision by the company of any security in respect of any loan to any such directors or any such company.

Professional standards

A law corporation is authorised to do anything that a solicitor can do by law, and is required to do all that a solicitor is required to do by law (section 81D(1)). A law corporation has the same rights and is subject to the same fiduciary, confidential and ethical requirements that exist at law between a solicitor and his client with respect to its clients. Further, solicitor-client privilege exists between a law corporation and its client in the same way as it exists between a solicitor and his client, and this privilege extends to every solicitor who is an officer or employee of the corporation (section 81E). (Section 81E(3) states that sections 128-131 of the Evidence Act (Cap 97) on professional communications shall apply to a law corporation, its officers and its employees as it applies to a solicitor.)

A solicitor who provides legal services as a director or employee of a law corporation is subject to the same standards of professional conduct and competence with respect to legal services offered as if he were personally providing the legal services as a solicitor in a law firm [section 81D(3)].

Professional liability

The directors of a law corporation who are solicitors shall be jointly liable to disciplinary proceedings under the Act if the business of the law corporation is conducted in a manner unbefitting of an honourable profession and where such conduct cannot be attributed to the act or omission of a particular solicitor or solicitors whose identity is known (section 81F(2)).

The mere fact that a solicitor personally provides legal services as a director or an employee of that law corporation does not affect his personal liability at law (section 81D(4)). Hence, any solicitor who provides legal services as a director or employee of a law corporation would still be liable for his own misconduct or negligence in the provision of legal services through that law corporation (section 81F(1)).

Professional indemnity

Section 75A which empowers the Council to make rules concerning indemnity against loss arising from claims in respect of civil liability incurred by solicitors have been extended to include civil liability incurred by a law corporation in connection with legal services performed by it or with any trust of which it is a trustee.

Winding up

Apart from the grounds for winding up prescribed by the Companies Act (see Part X, Companies Act), the Bill lists two other grounds:

where the law corporation ceases to satisfy the requirements of the Act or Rules; or
where the business of the law corporation has been conducted in a manner unbefitting of the profession.

An application to wind up a law corporation on any of the two additional grounds can only be made by the Attorney-General or the Council (clause 12 of the Bill, section 81I).

Other amendments

The Bill also makes miscellaneous and consequential amendments to the Act in relation to the application of the Act to law corporations. (Clause 16 and the Schedule of the Bill. For instance, the provisions in the Act relating to intervention in a solicitor's practice and inadequate professional services respectively are made applicable to law corporations.)

Formal Law Alliances and Joint Law Ventures

Joint collaboration

Part IXA provides for two different arrangements which may be entered into by a foreign law firm (section 130A defines a 'foreign law firm' to mean a foreign law firm with an office or a place of business in Singapore which provides legal services in any foreign law in Singapore or elsewhere and includes a corporation duly constituted for the purpose of practising law) and a Singapore law firm (section 130A defines a 'Singapore law firm' to mean a firm of advocates and solicitors and includes a law corporation registered under Part IVA) to provide legal services in Singapore. These are: the Joint Law Venture ('JLV') and the Formal Law Alliance ('FLA'). Both the JLV and the FLA must be registered pursuant to the Act, on such terms and conditions and for such period as the Attorney-General may think fit (sections 130B(1) and 130D(1) respectively). An application to register a JLV or a FLA must be submitted to the Attorney-General by a foreign law firm jointly with a Singapore law firm. The Attorney-General may refuse to approve an application without assigning any reason (sections 130B(4) and 130D(4).

Joint Law Venture (JLV)

Constituting a JLV

A JLV may be constituted in any one of three ways, namely:

by a partnership between a foreign law firm and a Singapore law firm;
by the incorporation of a company under Singapore law with shares in the company held by a foreign law firm and a Singapore law firm or by their respective nominees; or
by any other arrangement or means as may be prescribed (section 130B(2)).

A JLV is not a law corporation for the purposes of Part VIA.

In constituting a JLV, the constituent law firms may share office premises, profits or client information with respect to the legal practice of the JLV, and the JLV is deemed to be an exempt private company for the purposes of the Companies Act, notwithstanding that the shares in the JLV may be held by more than 20 members (section 130B(7) and (10)).

A foreign law firm that constitutes a part of the JLV may not practise as a foreign law firm in Singapore except through the JLV (section 130B(8)).

Privileges

A JLV is entitled to the following privileges (section 130B(6)):

to practise in areas of legal practice mutually agreed between the law firms constituting the JLV;
foreign lawyers2 who are employed by or who are partners or directors of the JLV may practise Singapore law as an employee, partner or director of the JLV if he is registered to do so by the Attorney-General but this is subject to the restriction in section 130C(2);
the JLV may market or publicise itself as a single service provider competent to provide legal services in all areas in which the constituent law firms are qualified to provide;
the registered JLV may bill its clients as a single firm; and
such other privileges as may be prescribed or otherwise conferred by law.

Formal Law Alliance (FLA)

Constituents of an FLA

Although an FLA must be constituted by at least one foreign law firm and one Singapore law firm, it may be constituted by more than two law firms (section 130D(2)). Furthermore, a foreign law firm or a Singapore law firm may apply for registration of more than one formal alliance. An FLA may share office premises, profits and client information (section 130D(7)).

Privileges

An FLA is entitled to the following privileges (section 130D(6)):

the FLA may market or publicise itself as a single service provider competent to provide legal services in all areas in which the constituent law firms are qualified to provide;
the FLA may bill its clients as if it were a single law firm; and
a foreign lawyer who is a partner, director or an employee of the foreign law firm which constitutes part of the FLA may prepare all the documents in a transaction involving the law or regulatory regime of more than one country or jurisdiction, except that any legal opinion relating to Singapore law must be given by a Singapore lawyer who has in force a practising certificate.

Comparison between a JLV and an FLA

There are three significant differences between a JLV and an FLA. Firstly, an FLA can have more than two constituent law firms but a JLV must comprise only two law firms, unless the Rules prescribe other arrangements or means of constituting the JLV. Secondly, a JLV can be constituted by a company incorporated under Singapore law (the shares of which are held by a foreign law firm and a Singapore law firm or their respective nominees) but an FLA cannot. Thirdly, a foreign lawyer in a JLV can practise Singapore law if he has been registered by the Attorney-General to do so, whereas a foreign lawyer in an FLA can only prepare documents of a transaction involving the law or regulatory regime of more than one country but cannot give any legal opinion relating to Singapore law (section 130B(6)(b), which is made subject to the restrictions in section 130C, compared with section 130D(6)(c)).

Professional conduct

Section 130E provides that a foreign lawyer practising Singapore law in a JLV must comply with the Rules relating to professional conduct, ethics and accounts. The provisions of sections 72 and 73 and the rules made thereunder apply to a JLV in respect of the practice of Singapore law.

Solicitor-client privilege exists between a JLV or FLA and its client in the same way as it exists between a solicitor and his client.

Any complaint with respect to the conduct of a foreign lawyer registered to practise Singapore law must be made to the Attorney-General. The Attorney-General shall give the foreign lawyer a reasonable opportunity to make representations in writing and the Attorney-General may make any of the following orders if he is of the opinion that there is sufficient reason for doing so:

cancel or suspend the registration of the foreign lawyer for such period as prescribed by the Attorney-General to practise Singapore law;
censure the foreign lawyer;
order the foreign lawyer to pay a penalty not exceeding $5,000 or such other higher sum as may be prescribed; or
make such other order as he thinks fit (section 130F(3)).

Grounds for cancellation of registration

The grounds for the cancellation of a JLV or FLA registration are:

the foreign law firm's home registration authority cancels its registration as a result of criminal, civil or disciplinary proceedings, or where the registration or authorisation of the foreign law firm by its home registration authority has lapsed;
the JLV or FLA fails to comply with any requirement or condition imposed under Part IXA of the Act or any rules made thereunder;
the JLV or FLA has been dissolved and reconstituted without the approval of the Attorney-General; or
the Attorney General is satisfied that it is in the public interest to do so (section 130G(2)).

This list is not exhaustive because the Attorney-General may also cancel the registration of a JLV or FLA if he is satisfied that there is sufficient reason to do so (section 130G(1)). Any cancellation is subject to the JLV, FLA or the firms constituting the JLV or FLA being given a reasonable opportunity to make written representations to the Attorney-General (section 130G(3)).

Conclusion

The Legal Profession (Amendment) Bill has set out the legal basis and structure for Singapore law firms to corporatise and for foreign law firms and Singapore law firms to collaborate to provide legal services.

Every Singapore law firm should carefully and thoroughly consider and decide whether they would be better equipped to respond to the changing needs and demands of the legal profession in this millennium by corporatisation and/or JLV or FLA or by remaining as it is.

Ronnie Quek
Allen & Gledhill

Endnotes

Under the Companies Act, an 'exempt private company' means: (a) a private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has not more than 20 members; or (b) any private company, being a private company that is wholly owned by the Government, which the Minister, in the national interest, declares by notification in the Gazette to be an exempt private company.
Section 130A defines a 'foreign lawyer' to mean a person who is duly authorised or registered to practise law in a state or territory other than Singapore by a foreign authority having the function conferred by law of authorising or registering persons to practise law in that state or territory.