Key Takeaways from New Solicitors Accounts Regulations 

Key Takeaways from New Solicitors Accounts Regulations

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By the end of June, all solicitors in Ireland will be subject to new accounting regulations. The new rules, which came into force on 1 July 2023, offer increased protections for client monies and represent the biggest compliance shake up in accounting for legal profession in a decade. 

The new regulations apply to accounting periods that began on or after 1 July last year, meaning they won’t be universally implemented until 30 June this year. 

The far-reaching changes were developed by the Law Society in collaboration with the member bodies of the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I).  

Here’s an overview of some of the key takeaways…

Who do the regulations apply to? 

One significant change is that responsibility for any breach of the regulations has been extended. Solicitors who are principles, partners or who handle client monies directly can now all be found liable.

What do they apply to? 

In a change from the previous regulations dating back to 2014, the definition of ‘client monies’ has also been extended. The definition now includes any funds received by a solicitor acting on behalf of the personal representative of an estate. It’s no longer a requirement to open a separate account; instead, money received from an estate is to be held in the client’s main account. 

In another change, money received or held by a solicitor where no legal services have been provided no longer count as ‘client monies’ for the purpose of the regulations. In situations where money is still held in client accounts after the discharge of services where fees have been paid in full, it must be returned as soon as is practicable, up to a maximum of six months.  

Solicitors are also no longer permitted to pass personal money through a client account. An exception is that solicitors can pay the proceeds of loans made to them for the purpose of purchasing a property, as long as the funds are discharged in accordance with the terms of the loans or within 14 days of receipt. But aside from that, client accounts cannot be used for the purposes of loans between clients and solicitors, and solicitors cannot borrow from clients full stop unless the client has received independent financial advice.  

Tightening governance 

A main thread of the new regulations is to tighten the record-keeping and reporting obligations placed on solicitors, including new requirements for informing clients about the treatment of their monies. 

The list of changes in this regard is extensive, but some of the headlines are as follows: 

  • Solicitors are now required to prepare balancing statements concerning transactions in client accounts every three months, rather than six. 
  • There is an express obligation on legal practitioners to regularly review client ledger balances and address any unnecessary delays in discharging monies. Any ledger balances outstanding for two years or more must be reported to the Law Society, with a reason for why the balance is outstanding. 
  • All withdrawals from a client account must specify the client to whom it relates at the time of the withdrawal. If monies held in the account are being used to pay a solicitor’s professional fees, the client must be informed in writing. Documentary evidence is required if cash withdrawals are made. 

Full details of the new Solicitors Accounts Regulations can be found on the Law Society website, or you can download the full technical release here

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