Using the new rule
The new rule allows in-house lawyers to provide regulated services to a wider group of entities and organisations.
Regulated services are now able to be provided by an in-house lawyer:
(a) employed by a local authority, to Council Controlled Organisations (and Council-Controlled Trading Organisations) where the local authority holds not less than 50% of the shares in that Organisation;
(b) employed by a Health Board, to regional and national services entities (including special partnerships and charitable trusts) where the Health Board has not less than 50% control of the entity concerned;
(c) employed by a subsidiary entity to the controlling entity or to any other subsidiary entities of the controlling entity.
The definition of entity is that used in s.5(1) of the Financial Reporting Act 2013 and includes:
(a) a company, an overseas company, or any other body corporate:
(b) a corporation sole;
(c) a trust, a partnership, or an association of persons, whether incorporated or not;
(d) a scheme or fund;
(e) a retirement village (within the meaning of the Retirement Villages Act 2003);
(f) a society, a branch of a society, or a credit union registered or deemed to be registered under the Friendly Societies and Credit Unions Act 1982;
(g) the Crown, a department, or an office of Parliament (within the meaning of those terms in section 2(1) of the Public Finance Act 1989) or an organisation named or described in Schedule 4 of that Act;
(h) a Crown entity (within the meaning of section 7 of the Crown Entities Act 2004);
(i) a local authority (within the meaning of section 5(1) of the Local Government Act 2002).
Crown, a Crown organisation or statutory officer
An in-house lawyer engaged by the Crown, a Crown organisation or a statutory officer can provide regulated services to any other part of the Crown, a Crown organisation or a statutory officer (rule 15.2.4(c)). In the rules the following definitions apply (under s.6 of the Lawyers and Conveyancers Act 2006):
- Crown entity has the meaning given to it by section 7(1) of the Crown Entities Act 2004
- Crown organisation means a Crown entity, department, or government-related organisation
- statutory officer means a person—
(a) holding or performing the duties of an office established by an enactment; or
(b) performing duties expressly conferred on that person by virtue of his or her office by an enactment; or
(c) holding office as the chief executive of a Crown organisation.
In-house lawyers engaged by the Crown, a Crown organisation or a statutory officer are referred to the Public Prosecutions Unit at Crown Law (firstname.lastname@example.org).
Control and definitions of “subsidiary”
One of the most important aspects of the new rule is understanding “control” and the definitions of what it means to be a subsidiary entity. Where an in-house lawyer is engaged by a controlling entity the lawyer can provide regulated services to a subsidiary entity of the controlling entity (and vice versa) as long as there is sufficient control (50% or greater).
Where the entity is a company an entity is a subsidiary when the controlling entity holds at least half of the issued shares of the subsidiary entity or it is entitled to receive at least half of every dividend paid on shares (r 15.2.5(b)).
Whether or not the entity is a company subsidiary means and includes the situation where the controlling entity controls the composition of at least half the board (or governing body) or is in a position to exercise or control at least half of the maximum number of votes that can be exercised at a meeting of the subsidiary (r 15.2.5(a)).
A subsidiary can also mean a subsidiary that is a subsidiary of a subsidiary of the controlling entity (r 15.2.5(c)). For example, a lawyer engaged by subsidiary 1 can provide regulated services to: controlling entity, subsidiary entity 1 and subsidiary entity 2.
Independence, conflicts of interests, disclosure and communication of information to clients
A lawyer must be independent and free from compromising influences or loyalties when providing services (r 5 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008).
The new rules add a footnote (footnote 25A) to rule 15.2 reminding in-house lawyers of the rules contained within Chapter 5 (independence), chapter 6 (client interests) and chapter 7 (disclosure and communication of information to clients). It is recommended that lawyers who wish to use the new rule have in place procedures to identify and respond to conflicts of interest. These should be discussed in advance with the employer and the other entity to which the in-house lawyer will be providing regulated services where appropriate.
In particular in-house lawyers may wish to consider:
(a) whether the in-house lawyer can be independent and objective when providing advice to the other entity (r.5 and 5.3);
(a) that a lawyer must not act on a matter where there is more than a negligible risk that the lawyer may be unable to discharge the obligations owed to both the employing entity and the other entity to which the in-house lawyer is to provide regulated services (r.6.1);
(b) that a lawyer most promptly disclose all client information that the lawyer has or acquires that is relevant to the matter in respect of which the lawyer is engaged;
(c) whether informed consent is required to the non-disclosure of particular information (r. 7.3). See the template client care/letter of engagement.
Where it becomes apparent that an in-house lawyer can no longer discharge the obligations owed to both the employing entity and the other entity the lawyer must immediately inform each of this fact and no longer act on that matter (r.6.1).
Last updated on the 14th July 2016