Closing a Law Firm: Clients, Money and Records

Establish Who Can Close the Practice

Record the practice’s jurisdiction, legal structure and reason for cessation, then identify the person authorised to direct the closure. Keep the decision and supporting appointment documents with the closure register.

For planned retirement, the principal can arrange the sequence while still authorised to practise. Death, incapacity or loss of practising authority changes who can act. Locate the contingency plan and establish separately who can access records, operate trust money and perform legal work.

The Victorian regulator’s practice contingency policy requires the nominated practitioner to hold suitable practising authority. An informal nomination can still require a formal manager appointment. A power of attorney does not continue after death. Family relationship or possession of office passwords establishes neither practising authority nor trust-account authority.

Where authority is unresolved, contact the regulator immediately about the appropriate appointment route. Practice intervention explains the separate imposed-control process. Record who can coordinate protective action while that issue is resolved.

Protect Urgent Matters Before Ending Work

Start with a matter register that exposes every deadline and assigns the next action to a practitioner able to perform it.

1. Identify court dates, limitation issues, settlements and undertakings. Add money held, the responsible practitioner and the next required action for each matter.
2. Assign immediate cover for work that cannot wait. Obtain the covering practitioner’s acceptance and confirm access to the necessary instructions and records.
3. Give each client a usable contact and explain how unfinished work will be completed or transferred. Record their instructions and any contrary direction.
4. Confirm the receiving practitioner accepts responsibility. Complete required court or counterparty notices and retain proof before marking the handover complete.

A locum solicitor agreement can support accepted temporary cover while the authorised person decides whether the practice will resume or close. An unanswered referral email leaves responsibility unresolved.

The NSW Law Society’s transfer checklist explains the Uniform Solicitors’ Rules procedure for transferring a practice. It includes written notice about documents and money, with the client’s right to give contrary directions. Apply the relevant transfer procedure to the actual transaction.

Reconcile Client Money and Complete the Account Exit

Reconcile the trust cashbook and individual client ledgers to the bank balance, including outstanding payments and deposits. For each balance, record the entitlement, payment authority and cleared outcome.

Keep different problems separate. An unidentified owner requires the unclaimed trust money procedure. A disputed entitlement needs a lawful resolution. A suspected deficit needs prompt regulatory attention and a preserved investigation record. None is resolved by moving the amount to an office account.

The NSW Law Society’s trust accounting handbook explains final external examination under Uniform General Rule 68. Record the applicable requirements alongside the examination appointment and reporting period.

For Victoria, the regulator’s trust-account closure guidance requires closure notification and a final external examination within 60 days of account closure. It also addresses termination of the examiner’s appointment. Build these tasks into the account exit instead of treating the bank’s closure receipt as the final compliance record.

Retain the closing reconciliation, payment evidence and bank acknowledgement. If the ledger is nil but a payment remains unpresented, investigate its status before describing the money as finally dealt with.

Transfer Files and Keep Records Accessible

Transfer each file with evidence of authority, recipient acceptance and delivery, then record who holds it. Include original wills, deeds and other safe-custody property in a separate custody register.

In this fictional example, an estate client has a court deadline in five business days. The outgoing practice holds source bank statements, an analysis workbook and $2,400 whose entitlement remains disputed. The successor’s accepted handover includes the client’s instructions, deadline, source filenames and page references, plus the unresolved money issue. The closure register names the practitioner handling the deadline and the authorised person resolving the balance. A document delivery receipt alone would leave both duties unclear.

Assign a long-term custodian for closed files and original documents. Record the retention basis, retrieval contact, storage funding and access permissions. Apply legal records retention requirements to each record class, including legal holds.

Before ending software or storage contracts, export records in usable formats and test retrieval. Preserve audit history and confidentiality controls. Confirm that a former client can reach the custodian without needing a discontinued practice email account.

Settle Notifications, Insurance and Practice Obligations

Separate the practice’s cessation, its trust-money authorisation and each practitioner’s certificate status in the notification register.

NSW cessation guidance distinguishes practising-arrangement changes, entity notices and trust-money cessation notices. It allows surrender or expiry of a certificate. Victorian closure guidance requires written closure notification within 14 days and directs practitioners ending practice to surrender their certificate. Non-renewal is not the Victorian surrender process.

Obtain the insurer’s written position on run-off and successor-practice treatment before agreeing wholesale referrals or transfers. The Legal Practitioners’ Liability Committee’s closure guidance describes qualifying conditions. Its run-off policy governs the actual cover and excess. Closure does not erase an earlier claim or undertaking.

Assign employees’ entitlements, office liabilities and supplier contracts to responsible people. Keep a contact for later claims and record requests after the premises close.

Verify the Completed Closure and Continuing Responsibilities

Complete the closure register by matching each item to evidence and naming the person responsible for any remaining exception.

The closure can be signed off when urgent matters have accepted responsibility, money has an authorised reconciled disposition and clients can retrieve their records. Keep regulator receipts and bank confirmations with that sign-off. Every continuing duty must still have a named custodian after the practice stops taking work.