A change is coming in the way how many small law firms in Malaysia would operate. Last week, a circular by Bar Council was circulated to its members informing that the Small Firm Practice and Future of Law Committee is in the midst of amending the practice rules to allow small law firms to practice and operate as a practice group. Here’s why it’s a good news for both lawyers and startups.
What is group practice
Group practice means sharing premises, resources and infrastructure while remaining as separate entities. This means that the firms would share premises at a common address and infrastructure such as a library, furnishings, and equipment, as well as management services. There are many other features to be introduced by the Bar Council but it has not been legalised yet as the amendment has to take place first (I tried to find the actual circular on the Malaysian Bar but I can’t seem to find it).
Will this benefit startups
Young lawyers have always struggled with cash flow given the fixed costs of operating a law firm such as fulfiling with statutory requirements such as tax filing and accounting. Also, a sole proprietor is required to have a physical address as virtual offices has yet to be legalised by the Bar Council (one way to avoid renting a premise is using your own house address).
The proposed group practice is a pretty big deal and a game changer as many young lawyers have been lobbying such group practice to be legalised since the early 2010. As a client, this should be viewed in a positive manner as it will create more choices and options for startups to choose from.
It should be noted that the group practice would not constitute a partnership or a separate entity. Firms in the group practice would remain as separate legal entities, and maintain separate retainers with their respective clients. All the staff will be required to sign a confidentiality agreement to ensure that they will not divulge any confidential information.
Once this is implemented, young lawyers may focus more on getting clients and delivering better legal services while reducing their worries about cash flow issue and back end support such as managing clerks and other fixed costs. As the group practice seeks to achieve economies of scale, I would argue that legal fees among lawyers in these group practice should be lower as the costs are shared between different law firms.