New Solicitors’ Accounts Rules

The amendments to the Solicitors’ Accounts Rules (Cap. 159, Sub. Leg. F) (the “Rules”) came into effect on 1 July 2016.

The changes to the Rules were publicised over one year ago. During the past year, regular monthly training courses have been organised to enable practitioners to familiarise themselves with the new provisions and to modify the accounting procedures where appropriate to ensure compliance.

The Secretariat has been dealing with enquiries on the Rules and below are clarifications on some common queries.

What does a solicitor have to do upon receipt of a cheque from a client partly to settle a bill that has been issued for work done and partly to pay for costs on account for future work?

(a) One of the major principles underpinning the Rules is that a solicitor must “keep other people’s money separate from money belonging to the solicitor or the practice of the solicitor” (r. 1A(b)).

(b) Money paid to a solicitor expressly to settle his bill for work done is money belonging to the solicitor or his practice and should be paid into the office account (r. 9(2)(c)).

(c) Money paid as costs on account for future work belongs to the client and should be paid into the client account (r. 3(1)).

(d) The solicitor may ask for the cheque to be split. If he does, then the relevant amounts can be paid, as appropriate, into the office account and the client account (r. 5(a)).

(e) If the solicitor does not split the cheque, he can pay the entire amount into the client account (r. 4(d)), but to adhere to the principle that the client money and the office money should be clearly separated, he must transfer the office money (as explained in (b) above) out of the client account into the office account within a specified period, namely, within 14 days of receipt (r. 5(b)).

How should clients’ payments for settlement of disbursements be handled?

(a) “Disbursements” is defined as “any sum spent or to be spent by a solicitor on behalf of the client or trust” in the Rules (r. 2). All disbursements incurred by a solicitor should be expressly or impliedly authorised by his client and all disbursements should be shown separately from a solicitor’s profit costs (Commentaries respectively of Principle 4.03 and Principle 4.10 of the Hong Kong Solicitors Guide to Professional Conduct, Volume 1).

(b) Whether the amount has yet been spent or not, the nature of the payment must represent the actual amount paid or to be paid by the solicitor on behalf of the client or trust to qualify as “disbursements” under the Rules.

(c) When a client pays in a sum for the settlement of disbursements, the solicitor may pay the entire sum into the client account provided that:

(i) with respect to the amount that has already been paid by the solicitor (which is office money) (r. 7(a)(ii)), the solicitor transfers this amount into his office account within 14 days of receipt (r. 5(b));

(ii) with respect to the amount that is anticipated but not yet incurred by the solicitor (which is client money – r. 9(2A)(b)), the solicitor keeps this amount in the client account;

(iii) with respect to the amount that has been incurred but not yet paid by the solicitor (which is client money – r. 9(2A)(c)(i)), the solicitor keeps this amount in the client account until its settlement from the client account directly (r. 7(a)(i)) or pays the amount to the office account for settlement from the office account within four (4) working days (r. 9(2A)(c)(ii)).

Can a non-solicitor be the sole authorised signatory of a client account?

(a) No, money can only be withdrawn from a client account with the specific authorisation of the solicitor in whose name the client account is kept or where the client account is kept in the name of a firm, of any solicitor, partner, consultant or foreign lawyer in the firm (r. 7A(1)(a)).

(b) Any authorisation given by a certified public accountant (practising) or a person approved by the Council must still be countersigned by a person falling within (a) above (r. 7A(1)(b) and (c)).

Account for interest on client account

Rule 6A requires a solicitor to account to a client for any interest earned on the money held by him in the client account for the client in relation to a particular matter. However, in view of the prevailing low interest rate and the costs associated with the administration of this rule, pursuant to the power granted to it under the Rules, the Council has resolved to waive the operation of r. 6A with effect from 1 July 2016.

Apart from organising training courses on the Rules, if members have enquiries on the Rules, you are most welcome to direct them to the Regulation and Guidance Section of the Secretariat (Tel: 2846 0523) for assistance. 

Monthly Statistics on the Profession

(updated as of 31 May 2016):

 

Members (with or without practising certificate)

10,032

Members with practising certificate

8,734

(out of whom, 6,615 (76%) are in private practice)

Trainee Solicitors

1,003

Registered foreign lawyers

1,341

(from 32 jurisdictions)

Hong Kong law firms

862

(48% are sole proprietorships and 41% are firms with 2 to 5 partners)

Registered foreign law firms

76

Civil Celebrants

2,105

Reverse Mortgage Counsellors

445

Solicitor Advocates

39

(34 in civil proceedings, 5 in criminal proceedings)

Student Members

231

Registered Associations between Hong Kong law firms and registered foreign law firms (including Mainland law firms

32

Secretary-General, Law Society of Hong Kong