The appointment as a director in a law firm is a significant milestone for any young legal professional, as is the establishment and registration of a new legal practice. It is therefore essential that practitioners are aware of the legal requirements and properly prepared for when that stage arrives.

Fidelity Fund Certificate requirements
The Legal Practice Act, Act 28 of 2014 (LPA), came into operation in 2018, and there are specific important provisions for newly appointed directors in legal practice to take note of. The provisions of Rule 27.1 promulgated in terms of Sections 95(1),95(3) and 109(2) of the Act and read with Section 85(1)(b) of the LPA require of every legal practitioner who is a director in a law firm to have a Fidelity Fund Certificate (FFC), and that newly appointed directors must complete a practice management course approved by the Legal Practice Council (LPC) within a period of one year from the date on which the legal practitioner is appointed as a director and to obtain an FFC.

Practice management course requirements
The practice management course in accordance with Rule 27.1 is presented through lectures, seminars and other formats, including in-person lectures, with various modules by accredited service providers approved by the LPC. The course is aimed at equipping legal practitioners and making them aware of their legislative obligations regarding inter alia general practise management of a law firm, the operation of a trust account, risk management and insurance of a law firm. This is vital as the course is specifically required for sole practitioners who have no prior experience as directors of a law firm and aims to equip practitioners with the necessary skills.

The provision further states that new directors will be issued with a valid FFC once appointed; however, the practice management course must be completed within a period of one year from the date on which the first FFC is issued to a legal practitioner. 

Consequences of practising without a Fidelity Fund Certificate
The requirement of having a valid FFC is prescriptive in terms of the LPA, and a legal practitioner who is not in possession of a valid FFC is not allowed to practise. It is contrary to the provisions of the LPA, read with the Code of Conduct for Legal Practitioners, and the Regulations to practise without an FFC and in certain instances, the LPC is entitled to approach the High Court for the suspension of a legal practitioner who is practising without a valid FFC, pending compliance.

The provision(s) are not only important for large law firms but are vital for sole practitioners, newly established partnerships or incorporating entities to ensure they have a valid FFC in place. The consequence for sole practitioners or newly established partnerships who are not in possession of a valid FFC is that the law firm may not continue to practise until such time as an FFC has been issued by the LPC. 

One of the most important reasons for a valid FFC, apart from being a legislative requirement, is that in the event of misappropriation or theft of trust funds, clients can only claim the lost funds from the Fidelity Fund if the legal practitioner had a valid FFC. However, where a legal practitioner was not in possession of a valid FFC, clients may find themselves non-suited if their funds have been stolen or misappropriated.

Practical Challenges and Compliance Issues
In practise, it is observed that young legal practitioners either do not enrol in time for the practice management course, do not complete it within a period of one year and are then left without an FFC. The practitioners are then required to apply to the LPC for an extension of the period within which to complete the practice management course and to explain why the course was not completed within the specific time frames.

The various LPCs across the country are being inundated with these types of requests annually, with legal practitioners applying for extension(s), and in certain instances, the requests are repeated. This may be indicative that legal practitioners are not aware or do not appreciate the provisions contained in the LPA read with Rule 27.1, which is to their detriment and that of the members of the public that they serve. This must be addressed.

Proposed LPC Amendment
During May 2024, the LPC proposed an amendment to the provision of Rule 27.1 to address this aspect. The proposed amendment stipulates that before registering a legal practitioner on his or her own account, in partnership, or as a director of a practice, and before being issued with an FFC, legal practitioners will be required to have completed the practice management course first.

Policy debate: Access to the profession vs competency
The purpose of the proposed amendment can be seen as an attempt by the LPC to ensure that young legal practitioners are well-equipped with the necessary skills prior to becoming directors in law firms or establishing/registering new firms. However, it may also be seen as a further requirement, making entry into the profession more difficult for young legal practitioners, especially those who do not get an appointment in a law firm or intend to start their own practice. 

The entry to the attorneys’ legal profession currently makes provision for completion of practical vocational training in a law firm, the completion and passing of currently four admission examinations, which will change to five in 2027, before being admitted as a legal practitioner. Added to this is the requirement of right of appearance in the High Courts, which requires 3 years of post-admission practical experience or completion of a trial advocacy training before a right of appearance is issued. These requirements are all mandatory. 

With the above requirements, it poses the question of whether the proposed amendment is to the benefit of the profession or if the current system is effective. 

In my view, it is dependent on the perspective from which it is viewed. From the perspective of the practitioner, or from the perspective of what is in the interest of the profession? 

In my considered view, it is in the interest of the profession that the proposed amendment should be implemented, which, as at the date hereof, is not yet promulgated. I would encourage new entrants to the profession that consideration be given to completing the practice management course as soon as possible, as the requirement, like it or not, remains compulsory and unavoidable. 

Disclaimer: This article is the personal opinion/view of the author(s) and does not necessarily present the views of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever, and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).