Management defects of Personal Law Firms in Taizhou

The author was appointed by the Taizhou Bar Association to participate in the selection of personal law firms and outstanding lawyers in Taizhou City. In the process, the author learned from close range that most personal law firms do have insufficient practice norms. Some even have imperfect basic practice regulations, weak management, lack of space, and the ability for self-improvement. And simply can’t talk about the overall competitiveness of the law firm.

Here are the articles to explain, Management defects of Personal Law Firms in Taizhou

Combined with the analysis and research during and after the election. It relates to Person Law Firm in Management Systems. Development status of the individual law firms in Taizhou. The author believes that the current management defects of personal law firms mainly exist in the following aspects：

(1) Problems in the implementation of the current normative documents of individual law firms

The new “Lawyers Law” only provides for the establishment of personal law firms in principle. But there are no specific operating procedures. To this day, the “Measures for the Management of Individual Law Firms” have not been issued. Making the establishment and regulation of individual law firms lacking systematic norms, supervision, and guidance. On April 12, 2006, the Zhejiang Provincial Department of Justice issued the “Zhejiang Province Pilot Work Plan for Individual Law Firms” (Zhejiang Division [2006] No. 63).

The plan only clarifies that the pilot work of personal law firms should adhere to the principle of combining legality and exploratory nature. Except for the exploration allowed by the organization of law firms. The rest should carry out within the framework of existing legal provisions. For issues that are not clarified in the pilot plan for personal law firms in Taizhou, follow the “Lawyers Law”, and “Law Firm Registration Management Measures”, and refer to the relevant provisions of the “Partnership Law Firm Management Measures”.

It is obvious from this that the pilot work plan encourages the combination of bold exploration and prudent action. Actively promotes the combination of gradual and gradual progress. The purpose is to accumulate experience and make basic preparations for the introduction of more direct and standardized personal law firm management rules in the future.

Problems in the implementation 01

On March 08, 2007, the Zhejiang Provincial Department of Justice implemented the “Notice on Further Regulating the Administrative Licensing of Law Firms and Lawyers’ Practice” (Zhejiang Division [2007] No. 49), which involves the part of personal law firms. But still emphasizes that it is in the pilot stage and requires. That carries out by the conditions and procedures stipulated by the Ministry of Justice and provincial departments. Other departments on the pilot work of personal law firms opinions, plans, etc., Carefully reviewed and strictly checked. There are no further substantive regulatory requirements for the practice activities of personal law firms.

Compared with the Zhejiang Provincial Department of Justice, the Zhejiang Provincial Bar Association issued the “Implementation Opinions on the Implementation of the Standard Construction Year Activities of Partnership Law Firms” on February 22, 2005 (Zhejiang Division [2005] No. 24). The “Opinions” stand specifically aimed at the standardized construction of partnership law firms. They concretize in terms of guiding ideology, work objectives, and practice regulations, and are highly operable.

However, the industry norms on the management of personal law firms. That has existed formulated in judicial administration are extensive, weakened, and have poor operability. One sparse and one dense. The gap between them is not conducive to the standardized construction of individual law firms in Taizhou.

Problems in the implementation 02

From the perspective of Taizhou’s regional perspective, due to the particularity of the regional economy. The disadvantages expose by traditional organizational law firms in the operation process. The foundation of human cooperation has stood damaged, and the law firm has disintegrated or split frequently. Which has contributed to the rise of individual law firms. Also due to the exploratory and extensive nature of the management of individual law firms. With the increase of violations and prohibited records, the attention of judicial and administrative organs has increased significantly. Then there has been a strict and even restrictive attitude in the declaration and approval work of personal law firms in Taizhou.

This move is inevitably in violation of the “Lawyers Law”. The author believes that the progress and development of the regional lawyer industry should still carry out by the principle of combining bold exploration and prudent action, and actively promoting the combination of step-by-step progress. It is not a good idea to waste food because of unworthiness.

To promote the standardized management of law firms, establish a scientific evaluation system, create industry integrity, strive for excellence, and promote the standardized development of the law industry, the Taizhou Municipal Bureau of Justice and the Taizhou Bar Association have been performing industry management functions since 2010.

Problems in the implementation 03

At the same time, they have launched a “100% assessment” system for law firms according to local conditions. Which has made concrete requirements in terms of system construction integrity. Standardized practice participation in special activities, law firm performance, cooperation in supervision, guidance, and team building. Which has played a direct and positive role in standardizing the standardized construction and healthy and orderly development of personal law firms in Taizhou.

However, the aforementioned assessment system is general. Because of the situation where an individual law firm can build a firm by one person. How to carry out targeted, continuous, and long-term standardized activities. So that the professional ethics of lawyers in individual law firms, practice discipline education, investigation, and punishment of lawyers’ violations. The management of interns and the annual assessment of lawyers’ practice can resolve promptly, but there are few targeted methods. This still highlights the lack of effective measures for the management and regulation of individual law firms.

(2) Problems in the self-management of individual law firms

Individual law firms lack a relatively sound management system. According to the “Regulations on the Management of Law Firms” of the Ministry of Justice. Law firms should formulate practice management and other internal management systems. Which should involve business, finance, labor and personnel, administration, training, conflicts of interest, complaint handling, etc. Regulations, but personal law firms in Taizhou still have individual law firms that lack a systematic and standardized management system.

There are still loopholes for individual law firms to hire lawyers and auxiliary personnel to handle social insurance. Such as a pension, medical care, and unemployment. Some law firms still refuse to handle it or use wages in disguise to offset the aforementioned fees.

In the event of a labor dispute, it is very easy to touch on the risk of practice management. Individual law firms have not established funds for practice risk, career development, social security, etc. The statutory accounting ratio or the method of fund withdrawal and the proportion of costs is unreasonable. There are gaps in financial regulations.

It is difficult for individual law firms to recruit practicing lawyers externally, which affects medium and long-term sustainable development. The competition in the legal profession is ultimately competition for talents. Compared with partnership firms, it is more difficult for individuals to recruit lawyers. The current management system of certain lawyers is also not conducive to the training and introduction of practicing lawyers by individuals.

Article 16

According to Article 16 of the “Rules for the Implementation of the Management of Applying for Internships for Lawyers and Practitioners (Trial Implementation)” of the Zhejiang Provincial Bar Association. Which came into effect on July 1, 2011, the conditions for law firms to accept internships for lawyers. The law firm has been established for one year and there are qualified internship guidance lawyers.

The implication is that even if there are qualified internship guidance lawyers. Although outstanding lawyers are willing to enter the firm for internships, the newly established law firm cannot accept it. These regulations also mean that it is difficult for newly established law firms, including individuals, to train and introduce young lawyers. The aforementioned prohibitive provisions of the Zhejiang Provincial Bar Association are essentially in conflict with the “Rules for the Management of Lawyer Internships (Trial Implementation)” implemented by the All-China Bar Association on August 1, 2010.

Article 8

Article 8 of the rules stipulates that law firms shall not accept interns for internships in any of the following circumstances:

• No internship guidance lawyer meets the prescribed conditions;
• They have been subject to administrative penalties or industry punishments below the suspension of business for rectification, and less. Then one year has passed since the date of the punishment or disciplinary action;
• They have been subject to administrative penalties for suspension of business for rectification. And the penalty period has not expired or not more than three years after the expiration of the period;
• They have been subject to industry punishments that prohibit them from accepting internships, and the period of punishment has not expired. The rules of the All-China Lawyers Association do not restrict newly established law firms from accepting trainee lawyers.

Provisions of Article 16

• The provisions of Article 16 of the “Implementation Rules (Trial Implementation)” of the Zhejiang Provincial Bar Association are self-wilting and self-binding. They have no long-term effect on the development of the bar industry. They have a hundred disadvantages but no benefits to promoting the construction of a “ten thousand-person ratio” of lawyers in Zhejiang Province and even Taizhou City.
• Individual law firms lack talent training plans (including the training of young lawyers) and have not set up talent training funds. The method of fund withdrawal and the proportion of costs are seriously low. Which cannot guarantee the medium- and long-term development needs of law firms.
• Individual law firm personnel face obstacles to the flow of talents and are unable to contend with the strategies of headhunting. High-paying absorption implemented by large-scale law firms has prompted frequent job changes.
• Individual law firms have limited means of market development and cannot maintain and fix medium- and long-term customers.

(3) Financial and tax issues of individual law firms

In addition to the legal responsibilities of individual law firms, the risks of individual law firms cannot avoid. The financial and tax burden of law firms is unavoidable. On the one hand, individual law firm taxes and fees are too high. Which affects operating costs and even survival and development. Although individual law firms have the characteristics of low cost, high efficiency, small but refined, convenient, and fast, they cannot avoid the problem of excessive taxes and fees.

According to the Articles of Association of the Bar Association, law firms require to pay group dues every year. The standards for payment of dues vary from place to place. In most places, they uniformly collect according to the inter-firm standards of law firms. Regardless of the number of lawyers in the law firm, regardless of the difference between the partnership and the individual, the dues of the law firm collect according to a unified standard. The dues of the law firm seem to be equal in form, but they are not equal in substance.

According to the relevant provisions of the current tax law, the tax authorities always implement accounting and collection for law firms. Under the method of accounting and collection, the overall tax burden of law firms accounts for more than 25% of their operating income. In addition, individual lawyers also have to pay personal income tax. For individuals, taxes are excessive. The current method of taxation of tax income is not conducive to personal law firms. And the tax policies in Taizhou City do not reflect certain tax incentives for personal law firms.

On the other hand

The financial and tax management of individual law firms is also generally lacking in the following situations. Leaving many hidden dangers for the healthy development of the unit and even the entire industry.：

• The financial state is in disarray. More individual law firms only conduct simple bookkeeping of financial income and expenditure, and the bookkeeping vouchers are incomplete or illegal. Detailed ledgers such as account breakdowns have not been set up by relevant financial accounting regulations.
• Income has strong concealment. Since most lawyers handle cases directly with the parties, there hide income that does not reflect in the books of the law firm. This leads to a large loss of business taxes, surcharges, and income taxes, and also brings the risk of tax evasion.
• Falsely list expenses and costs. In the case where the fees are collected by the law firm, the lawyer provides bills that have nothing to do with the handling of the case to be reimbursed by the law firm and obtains the balance of the lawyer’s fees after deducting the agreed proportion or management fees from the law firm. In this way, not only did the lawyer’s income and income conceal. But also due to a large number of false expenses and costs, the law firm’s book losses were caused, resulting in a large loss of income tax.

Other things

• The means of falsely reporting expenses are diversified. Most of the false invoices are commercial invoices; the content of the invoices is mostly in the name of “office supplies”. There are invoices obtained in the past fiscal year, invoices for family activities expenses (a certain law firm is a male lawyer practicing. But the expenses are listed but reflect the expenses of women’s supplies), telephone bill receipts for personnel from foreign units, etc.;
• The catering invoices mix into welfare expenses and travel expenses. When the invoices are not enough to offset the income from lawyers’ fees. The wages of lawyers who did not obtain lawyers’ fees in the current month are used to offset the top. All of this restricts the healthy and stable development of personal law firms in Taizhou. It should have high value to judicial administration, industry associations, and researchers in the industry, and seek positive methods and channels to solve it.

Next, is the Construction of individual law firms.