Do You Have the Necessary Legal Documentation in Place & is it Up-to-Date?

To be really frank, it is truly amazing how few professionals actually have the appropriate professional and personal legal documentation in place and current. Now some would say such agreements are not worth the paper they are written on, however some form of guidance is better than none in my experience.

In our work with practitioners, I would guestimate that around 50% of practices with more than one equity holder either do not have a partnership or proprietorship agreement in place at all. If we then add to this percentage, at times the agreement has not been executed, that is, it’s still in draft form, or, in other instances, the agreement does not include all of the current equity holders....... just think about the implications of such scenarios. What happens if there is a dispute? What happens someone wishes to leave, or worse, dies.

If we then add to this the number of practitioners that do not have valid wills, guardianships, powers of attorney, critical care directives and the like, it really can be quite surprising.

I appreciate that this can all sound very morbid, however it can actually be quite empowering. At a conference I attended in the US last year on exit planning, one of the presenters spoke of reviewing his will annually on his birthday. Wow, just stop and think about that. Most would stay that was a terrible thing to do on a birthday. He also explained that he went one step further and had shared his intentions with those included in the will. This was his approach to addressing exit or succession planning by ensuring those parties involved were well informed of what was going to take place, in part to hopefully avoid disputes thereafter.

Now, whilst you may not want to necessarily go that far, these types of documentation are not something that remains current into perpetuity. Just think about your will for example; is it still current? I know mine is not, so this is well up the list of things to address in the not too distant future. Likewise, are all the current equity holders included in the proprietorship agreement? If not, and this document includes any form of restraint, are these parties bound by that?

Let me give you an example of why this is so important. We were representing a practitioner in the sale of their practice when they unexpected fell ill, very ill. The terms of the transaction had been agreed, the contracts had been drafted but yet to be executed. However the practitioner didn’t have any powers of attorney or guardianships or the like, thus during his time of significant illness, no one was able to represent their interests or even execute the contract for sale on their behalf.

As advisers we are often making such recommendations to our clients, however we seem to fail to follow our own advice. Interestingly whilst I was sitting on a plane today, I overheard two flight attendants taking about how both of their accountants had recently died. Again, not a very nice topic to hear, but it was nonetheless interesting to hear their comments. The general perception was their deaths where lifestyle related. Now, whilst I don’t know whether they were meaning personal or work lifestyle, I was taken aback by the discussion.

With an ageing practitioner base in our professions, this is not something that we can overlook, or if we do, be prepared for the consequences. Please, please, please, make sure both practice and personal legal documentation is executed, valid and current. Your family and colleagues will thank you for it.


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