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What is today's blog about?
In this week’s blog, we look at how to close down an RICS Regulated firm. Essential knowledge for RICS APC and AssocRICS candidates in relation to the mandatory Ethics, Rules of Conduct and Professionalism competency, as well as qualified Chartered Surveyors.
Why would a firm need to be closed down?
There are many reasons for closing down a firm, including insolvency, retirement, merger or closer as part of a strategic business decision.
How should the process be managed?
The firm closure process should be planned and managed diligently. This can help to avoid issues arising, such as non-compliance with the RICS Rules of Conduct or a future legal or professional negligence claim.
Here is a list of things that need to be done when a firm closes down:
Agree the closure date
Seek advice if the firm is insolvent
Inform staff and deal with any redundancies, ensuring you direct them to Government support if necessary
Inform clients and let them know if another firm could take over ongoing work (at the discretion of the client)
Deal with any outstanding money in client accounts (in line with the RICS Professional Statement Client Money Handling)
Notify your professional indemnity insurer to arrange run-off cover (on a claims made basis)
Make arrangements relating to hard copy and electronic files and keep them for as long as necessary (up to 15 years under the Limitation Act 1980). Any documents not required should be destroyed confidentially
Notify former clients to return any leases or other original documents being held for them
Inform RICS and fill in the firm deregistration form
Set up a system whereby anyone trying to contact you after closing is notified that the firm is closed, e.g., notice of closure on any physical offices, voicemail, closure notice on the firm’s website, amended notepaper to confirm the firm is not practising, emergency contact number and a mail redirection to a home address
Contact any other parties who need to be told about the firm closure, e.g., other insurance provider, accountant, solicitor, HMRC, bank and Information Commissioner (for data protection purposes)
Surveyors may also find contacting LionHeart, the profession’s benevolent fund, helpful for access to a legal helpline and professional counselling.
What is a phoenix firm?
A phoenix firm is where an RICS regulated firm closes in a disorderly way and then re-registers quickly as a new trading entity. This typically relates to firms with 1 to 4 partners and happens where a firm becomes insolvent or closes without having sufficient run-off cover in place.
As the opening of phoenix firms poses a significant risk to former clients, employees, creditors and the public interest, RICS have a range of powers available including:
Refusing registration for the new firm
Holding registration in abeyance pending the outcome of any outstanding disciplinary proceedings
Requiring risk mitigation measures to be implemented to avoid a repeat business failure
Imposing licence conditions to require the firm to apply risk mitigation controls
Requiring staff training in areas of concern
Monitoring on an ongoing basis
Providing additional support and guidance to the firm
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Stay tuned for our next blog post to help build a better you.
N.b. Nothing in this article constitutes legal, professional or financial advice.