Law firm succession planning: the basics for Canadian firms

\What is a law firm succession planning?

A succession plan outlines what will happen next, in case an unexpected event happens, regarding a lawyer’s handled cases and the law firm that they founded or is a partner of. For the remaining lawyers in the firm, a law firm succession plan will outline the transition process:

• in preparation for the retirement or resignation of a senior lawyer, and/or
• after an unforeseen incident happens (e.g., sudden death of a senior lawyer)

As for all lawyers, a succession plan can also work similarly as that of a will, commonly called a client transition plan. It can contain the transition process of the cases and any workload that they currently handle to another lawyer in case something occurs. As discussed below, the Law Society of Ontario (LSO) now requires each lawyer to have a client contingency plan.

While a client transition plan is usually implemented after an unforeseen event happens, a law firm succession plan can cover both temporary and permanent absence of a lawyer, such as:

• death
• disability
• incapacity
• retirement
• resignation
• sickness

Here’s a video from Canadian Lawyer Magazine, one of our sister publications, that discusses how succession planning is done for family-run law firms:

Canadian Lawyer also regularly publishes Special Reports on the top law firms and lawyers in the country. Check out their Special Report on the Top 10 Ontario Regional Firms.

Is a law firm succession planning important?

There are many reasons why a law firm succession plan is important. Ian Hull, who co-founded Hull & Hull with his father, learned that a small firm should include three basic aspects in its operations:

• an exit strategy in the partnership agreement
• a health insurance providing for urgent funding to allow the firm to pay out some of the capital to a partner’s family if necessary
• all partners should have powers of attorney and wills

This is the result of his experience when it came the time for his father to retire and pass on the leadership of the firm to him.

In addition to these are the compelling reasons that demands for the preparation of a law firm succession plan:

• it's crucial for ensuring a smooth transition when senior partners retire, leave, or suddenly dies or becomes incapacitated
• it maintains the order with the law firm, regardless of any huge adjustments brought by the uncertainties among the senior officers
• it ensures that the files and active cases of clients are still pursued, even if its original handling lawyer cannot continue it anymore

What is the process of doing a law firm succession planning?

Contrary to popular belief, doing a law firm succession planning can be a simple process. Just like how lawyers can simplify things for their clients when writing a will, a succession plan doesn’t have to be a difficult one. However, this will also depend on the complexity of the law firm’s operations and the circumstances surrounding the lawyers within the firm.

Here’s a common step-by-step process of doing a law firm succession planning:

1. Learn about the key elements of a law firm succession plan
2. Draft, finalize, and store the law firm succession plan
3. Keep the law firm succession plan updated

We’ll discuss these steps below. As additional background, this video from the LSO gives an overview of how it supports law firms in making their own succession plans:

You can also go to our Professional Regulation page for more articles discussing some important updates from the LSO.

1. Key elements of a successful law firm succession plan

The most critical factor in a succession plan is that it must be complete with all necessary information. This is to help the successor or administrator in continuing, closing, or transferring the practice of the deceased, retired, or incapacitated lawyer.

Here are the important elements that you should consider when doing a law firm succession plan:

• option for a law firm succession plan: there are a lot of options you can take for your law firm, including appointing a successor, merging with an existing firm, or closing or selling the firm; an option becomes the foundation for all the other elements of law firm succession planning
• appoint a successor or an administrator: this answers who will be next in line to take the torch from your leadership in the law firm, or to act as the administrator for any unexpected event; it’s important that you get their consent before putting their name/s in the succession or transition plan
• include a client transition plan: this part of the succession plan details each step that your successor administrator will take for each unforeseen circumstance, i.e., in case of illness, disability, incapacity, disbarment, or death
• location of client and firm data: whether in a succession plan or client transition plan, you must indicate the location of all crucial hard and soft files — including access to it, such as passwords and location of keys — that are related to your clients’ cases and the firm’s business
• outline specific strategies for the plan: based on the option you’ve chosen for your succession plan, you’ll specify how this will be achieved, such as how to transfer the technologies and knowledge to the successor, among others

Client transition in law firm succession planning

When it comes to clients' files and cases, the LSO has recently amended its by-laws, which will now require lawyers to create a client contingency plan. Starting 2025, lawyers will have to confirm in their annual report filing that they have already made client contingency arrangements.

Under a client contingency plan, a lawyer will pre-appoint another lawyer, called the administrator. When an unexpected event happens, this administrator will:

• notify the LSO and the professional liability insurer of the appointing lawyer
• inform the appointing lawyer’s clients of this unexpected event
• return all properties, including trust funds, handled by the appointing lawyer to the appropriate client

While this client contingency plan may be different or be a part of a law firm succession plan, what’s important here is that the cases handled by a lawyer are not put at risk. The LSO also advises lawyers to go beyond what is required by the law society.

2. Drafting, finalizing, and storing the law firm succession plan

A succession plan, whether it be for the law firm or by a particular lawyer, must be drafted right after:

• the law firm opens its services to the public; or
• a person becomes licensed to practice law

Storing a client transition plan, on the other hand, is another issue. Since a client transition plan is triggered by unforeseen events, who you appointed as administrator must know the location of the plan. This goes back to the point that your administrator has consented to such a role.

3. Keep the law firm succession plan updated

Over the years, a completed law firm succession plan may be changed, updated, or replaced by another plan, depending on the circumstances. For instance, when partners or leadership roles suddenly change in a law firm, then it’s time to dig that plan and review it. As for lawyers, the bulk of caseload and personal circumstances are prompts for revising one’s old succession plan.

Note that for LSO’s mandatory client contingency plan, it must be reviewed at least once a year so that it’s up to date.

What are the options for a law firm succession plan?

One of the key elements for law firm succession planning is to decide which course the law firm will be taking when there are changes in leadership or in the firm’s business. This may include a senior lawyer’s passing, retirement, or resignation.

To help you decide on which option to take, we’ll explain each of these below:

1. Appointing a successor

One of the most common ways of ensuring the firm’s continuity of legal services is to appoint a successor or to hire a junior lawyer. This successor can either be a current partner, shareholder, or associate who will later take the leadership. Hiring a junior lawyer can also be done, who will then transition into the firm as a partner.

Here are some suggestions so that there would be a smooth transition between the junior and the senior lawyer:

• Set up the plan a year or more before retirement: The successor junior lawyer must be prepared in advance, and this will entail at least a year or even way beyond that. It’s also to acknowledge that learning the ropes of a firm’s business would need huge adjustment for the successor junior lawyer. This will also depend on the size of the firm’s operations and cases it currently handles.
• Engage the new lawyer in existing transactions: Have the younger lawyer be involved in all deals prior to the retirement of the senior practitioner, suggests Michael Litchfield, managing director of Thinklab Education and Training. If that doesn’t happen, a business that dealt exclusively with the senior lawyer may not want to suddenly work with a new person and may consider taking the work elsewhere, he adds.
• Combining the succession plan and client transition plan: To simplify matters, the successor junior lawyer can also be the administrator of the senior lawyer’s client transition plan. While this can be a risk to begin with, it will be more beneficial for the law firm and the senior lawyer in the long run.

2. Merging with an existing firm

Another option would be to merge with another law firm. In this case, timing would be a factor, since an opportunity to merge may arise when the firm’s top leadership are still not ready to let the firm go. But when all is right, this can be a better choice, since:

• employment of current partners and associates in the firm are secured, and
• clients' cases are continued by the merged or new firm

3. Closing or selling the firm

Closely related to a merger is to entirely close or sell the firm. This is usually the best thing to do when a successor cannot be chosen, or when an opportunity for a merger with another firm is not possible. Compared to the other options, winding up the firm’s business may be easier, since it’s more of a straightforward process.

4. Default contingency plan

In the absence of a client contingency plan, the rules of the different law societies may apply and dictate what happens afterwards. Without an administrator, the law society becomes responsible for appointing a caretaker should something happen to the lawyer.

For instance, LSO’s Trustee Services may have to step in when a lawyer dies, becomes ill, deranged or demented, cannot be located, or was disbarred. The assistance of the Trustee Services may be requested when:

• a lawyer needs advice in preparation for their retirement and the transferring of files to another
• help is needed to get the files of a lawyer who is no longer practicing, but is held by another lawyer
• looking for other files of the clients, including the wills and other legal documents, supposedly in the lawyer who is no longer in practice

However, all of these may be prevented by having a lawyer or law firm succession plan. With the Trustee Services’ limited powers over a case, turning over of client files and the handling of their case becomes simpler when there’s a succession plan in place.

Law firm succession planning: a must for the new and the seniors

Whether you’re new in the legal profession, or are already an expert with years of experience, doing a law firm succession planning becomes a must. Aside from walking the talk when urging clients to be prepared in the future — especially if you’re a wills and succession lawyer — having a good succession plan will benefit you greatly in the long run.

For more resources to help you in running your firm, aside from law firm succession planning, regularly check out our Practice Management page.