Reducing Overheads

“Location, Location, Location” goes the classic advice, stressing the importance of the location of a business to its success. In deciding the location, consideration is normally given to factors like brand visibility, convenience to people that interact with the business including clients, suppliers, employees and others, and costs. Traditionally, law firms in Hong Kong are mostly located in the core business districts, like Central and Admiralty, that are well supported by convenient transport and easily accessible to the nearby High Court, government registries and commercial buildings that house most of their clientele. Recently, the soaring costs of office space in Central have triggered a relocation of an increasing number of international law firms (eg Berwin Leighton Paisner, Ince & Co, Freshfields, Baker & McKenzie, RPC, Simmons & Simmons, Eversheds) away from the core business district to Quarry Bay, an emerging business district further east to save costs.

Law firms with a bigger scale of operation that requires more office space may find relocation an effective option to save costs. For sole practitioners and partnerships of a smaller scale of operation that allow more flexibility in managing the structure of their own businesses, other cost saving options, including cost sharing, are available.

Generally, a solicitor’s practice, be it a sole proprietorship or a partnership, must be conducted in self-contained premises. Staff and facilities must be under the control of the sole proprietor or partners of the firm. Subject to certain exceptions, a firm is not allowed to share premises, facilities or staff with other firms.

Having a formal association is one of the exceptions. In situations where two firms are ready to be closely connected, they may consider sharing a common equity partner to form a formal association. Pursuant to Law Society Practice Direction D 5(3)(iii) and 5(5), where there is such a formal association, the two firms can share premises, personnel and facilities.

However, some firms may wish to maintain their own independence without any form of association with other firms. Operating in the form of a Group Practice may be a cost saving option for these firms.

Group Practice was introduced to enable firms to pool their resources and reduce the operation cost through the sharing of overheads. Group Practice is not an entity. Neither is it a law firm. Group Practice is a term used to describe the mode of operation whereby two or more law firms conduct their businesses from the same address as separate practices but cooperating with each other in sharing the use of facilities and unqualified staff. By joining a Group Practice as a member, a firm does not lose its identity or change its status. Each member of a Group Practice remains a separate and independent practice. Members of a Group Practice are not to be regarded as practising in partnership, save in circumstances expressly provided for in the relevant legislation, including matters relating to conflict of interest and confidentiality.

When determining whether there is a conflict of interest, all members of the same Group Practice will be regarded as practising in partnership. A conflict check before acceptance of instructions by a member should therefore cover all members of the same Group Practice and not just within the member itself. By way of example, if a member of a Group Practice is already acting for a plaintiff in a litigation matter, another member of the same Group Practice, although a different firm, cannot act for the defendant in the same case. The reason is that on the issue of conflict of interest, members of the same Group Practice will be regarded as practising in partnership and solicitors of the same partnership obviously cannot act for opposing parties in the same matter.

The members of a Group Practice are allowed to share facilities and unqualified staff. To the extent necessary, a member of the Group Practice may have to disclose its clients’ affairs to an unqualified staff who is at the same time working for other members of the Group Practice. When applying the rules of confidentiality to a Group Practice situation, members of the same Group Practice shall be regarded as if they are practising in partnership with each other.

The sharing of premises, staff and facilities introduced by the concept of Group Practice are aspects of internal office administration. Group Practice does not affect the way legal services are to be provided by solicitors to clients. A client of a member of the Group Practice remains the client of that member. No solicitor-client relationship will be created between the client and other members of the same Group Practice.

In addition to a reduction of overhead costs, other benefits of operating in the form of a Group Practice may include relief of the stress of running a solo practice through the opportunity to consult, share and exchange ideas on legal and other problems with other members in the Group Practice.

Members are welcome to contact us should there be any enquiries on the regulations or how to go about setting up a Group Practice. Information on Group Practice including the relevant rules (Solicitors (Group Practice) Rules (Cap. 159 sub leg)) and a manual for setting up a Group Practice are available on the Law Society website.

Jurisdictions: 

Secretary-General, Law Society of Hong Kong