Directors and shareholding
Only lawyers actively involved in providing the incorporated law firm’s regulated services may be directors. For medium to large firms, particularly, the issue may arise as to which lawyers are to be directors. This could range from the members of the firm’s management board to all those who hold voting shares. Under the LCA, the deemed director provisions in the Companies Act 1993 will not prevent a company from being an incorporated law firm (s15(2)).
Two categories of shares are allowed – voting and non-voting.
Only actively involved lawyers can hold voting shares.
Non-voting shares may be held by relatives of the directors or by a qualifying trust. Relatives are defined in s6 of the LCA and include a spouse, civil union partner, de facto partner, parent, grandparent, child, brother or sister of an actively involved lawyer.
The definition of ‘incorporated law firm’ (s6) allows an administrator of a shareholder’s estate to hold the deceased’s shares.
It is clear that the intention of the act is to ensure that:
- control of an incorporated law firm rests in the hands of actively involved lawyers; and
- ownership resides with actively involved lawyers and their relatives.
In this area, caution is recommended as the effect of taking a firm outside the definition could result in serious breaches of various provisions in the LCA.
Last updated on the 3rd June 2015