Closing a law firm is a formidable task. The existing management team, prepared for running a going concern, is often unprepared for the various challenges that arise as the firm is wound down. Even though it is advisable for a closing firm to obtain outside assistance, a small but dedicated group from the firm must be put in charge of the closing effort.
Many interests must be accommodated in any law firm closing. Long time acquaintances and friends still at the firm will have special issues. Former employees and owners likewise will have issues and will seek assurances. It can be an emotional experience as a sense of loyalty is often felt towards these firm related people.
These legacy interests are not the only interests that must be served. The firm’s duty to its clients continues, certainly at least until matters are transitioned to new firms. Contractual duties are owed to third parties with whom the firm has done business. Finally, duties to the owners of the firm remain as the firm is closed and wound down.
When closing the firm it is crucial to appoint the right people to manage the wind-down, including these relationships. The management team in charge prior to closing frequently is not right for the job of executing the wind-down. For one thing, the last members of the going concern management team may not want to be involved in the wind-down process. Indeed, they may be the least suited to manage the wind-down, and may have little support among the owners for the job.
In all likelihood, a new team will be selected to manage the closing of the firm. In picking the right people, the following characteristics prove very useful:
Judgment. A law firm wind-down involves a never-ending presentation of unanticipated issues. Being flexible, attentive to detail and relentless in pursuing a fair and equitable close is extremely helpful. Yet wrapping up a law firm’s business requires the daily exercise of sound judgment. Selecting a team that has a history of exercising good judgment should be a primary concern.
Firm Knowledge. Good institutional knowledge about the firm pays dividends every day. Decisions that can be made with the use of historical recall save time and money. Historical knowledge also aids in knowing where to look when research is required.
Committed to the Task. When a law firm closes, many people otherwise suited to help in the wind-down move on to their next firm, career or challenge, and are not available to help. Thus, from the start your draft pool from which you select your team may be smaller than desired. Even though some of the best candidates may no longer be available, it is wise to select team members that have the time to see the task through its conclusion. Excessive unplanned turnover during the middle of the project can upset momentum that is critical to success.
Trust. In a law firm closing, the potential for mistrust is significant. Virtually everyone relying on the closedown team will fail to appreciate the difficulty of the day-to-day decisions that have to be made. Questions will arise and answers may feel unsatisfying. For that reason, selecting your team from persons that were respected while at the firm will aid in the delivery of news. A wind-down team can’t rest on its laurels—it must continually work on retaining and building trust as the task continues.
Communicative. As the wind-down process unfolds, there can be no substitute for communicating with parties in interest. Silence causes parties to assume the worst whereas constant communication tamps down suspicion and keeps everyone informed of progress. Moreover, good communication breeds trust, a commodity that must be hoarded. For that reason, the team must include members that are good at communicating.
If your firm had to close, would you be able to assemble a team that had these traits?