Amendments to the Legal Professions Act 2007 - External Administration

On 25 May 2020, the Justice and Other Legislation Amendment Act 2020 (Qld) came into force. It included amendments to the Legal Profession Act 2007 (Qld) (the Act) which broadened the meaning of what a suitability matter and a show cause event constitutes.

What is a suitability matter and what amendments were made?

The Act states that a person is only suitable for admission to the legal profession if they are a fit and proper person. In deciding this, the Supreme Court may take into account any suitability matter relating to the person that is appropriate. With the recent amendments, a suitability matter now includes whether the person is or has been a director of a corporation while the corporation is or was a chapter 5 body corporate.[1] The addition of this amendment to the definition of suitability matter had the effect of broadening section 46 of the Act.

Section 46 provides a framework for deciding whether an individual is a fit and proper person to hold, or to continue to hold, a local practising certificate. Now, to be considered a fit and proper person a regulatory authority may consider two (2) additional suitability matters being:

• (2)(g) whether the person is or was a legal practitioner director of an incorporated legal practice while the practice is or was insolvent;

• (2)(h) whether the person is or was a director of a corporation while the corporation is or was insolvent;

What these amendments mean for persons applying for a local practising certificate

If you seek to be admitted as a legal professional and have previously been a director of a corporation that is or was a chapter 5 body corporate, you are required to declare all relevant suitability matters or show cause events.  Accordingly, if there is a relevant show cause event to be notified, including the new ones listed above, you may not be considered a fit and proper person suitable for admission.

What these amendments mean for persons holding a local practising certificate

Any person that holds a Queensland practising certificate must notify the Queensland Law Society when a show cause event occurs.

The definition of a show cause event was amended to reflect the recent changes to the Act to include a person being a director of a corporation that becomes a chapter 5 body corporate.[2]

Therefore, if you hold a local practicing licence and are a director of an incorporated legal practice or a director of a corporation (irrespective of whether it is related to law or not) that has become insolvent, you are required to submit a Form 7 under section 68 of the Act to the Queensland Law Society within seven (7) days of the show cause event occurring.[3] You are then required to submit a written statement explaining why, despite the event, you continue to be a fit and proper person to hold a local practicing certificate.[4]

Note, this would also include the restructuring of a corporation under the new small business regime and the appointment of a small business restructuring practitioner.

If you hold a local practising certificate and are required to submit a Form 7 due to a show cause event, the Queensland Law Society holds the power to refuse, amend, suspend or cancel your local practising certificate at their discretion. From here, you may apply for a review of the decision by the Queensland Civil and Administrative Tribunal.

How does this impact practicing certificate renewals?

As part of renewing a practicing certificate, a person is required to answer the following questions:

• Have you been subject to any of the suitability matters mentioned in ss9 and 46 of the Legal Profession Act 2007 which may affect your suitability to hold a practising certificate?

• Have you been subject to any ‘show cause event’ as defined in Schedule 2 of the Legal Profession Act 2007 which may affect your fitness to hold a practising certificate?

If the answer is yes, then a notice (QLS Form 7) and statement is required to be provided to the Queensland Law Society, which provides details of the event and a written statement explaining why, despite the event, the practitioner continues to be a fit and proper person to hold a local practising certificate.

What to do?

We always suggest being proactive in dealing with difficult financial situations. The key is to avoid, where possible, an external administration, however if that is not possible, being properly advised and taking reasonable and appropriate steps as early as possible may assist with showing the Queensland Law Society why you continue to be a fit and proper person to hold a local practicing certificate.

The senior staff at WCT Advisory have advised and been involved in the liquidation of several law firms, service entities and other businesses unrelated to the law practice associated with an individual holding a local practising certificate. WCT Advisory are otherwise well qualified to assist any director facing financial difficulties.

[1] Legal Professions Act 2007 (Qld) s 9(1)(d) (‘The Act’); see Corporations Act 2001 (Cth) s 9 (definition of ‘Chapter 5 body corporate’).

[2] The Act Schedule 2.

[3] Ibid s 68(1)(a).

[4] Ibid s 68(1)(b).