Attorneys Act replaced in its entirety by Legal Practice Act

Attorneys Act replaced in its entirety by Legal Practice Act
02 Nov 2018

The last major changes affecting the legal sector due to legislative changes were taken on 1 November 2018.

The remaining chapters of the Legal Practice Act were implemented on 1 November 2018, thereby replacing the Attorneys Act 53 of 1979 in its entirety.

This comes after the Legal Practice Act No. 28 of 2014 was enacted on 22 September 2014 following many years of comments on the Legal Practice Bill.

Some of the more important changes which take effect on 1 November include trust interest, which to date has been paid to Law Societies, and now will be payable directly to the Legal Practitioners Fidelity Fund (LPFF).

The Attorneys Fidelity Fund became the Legal Practitioners Fidelity Fund (LPFF) on 1 November.

The four Law Societies will be dissolved and replaced by nine Provincial Councils and these councils will fall under a new structure called the Legal Practice Council.

Every attorney and advocate, with certain exceptions, must operate a trust account. The trust account practice must keep a trust account at a bank with which the Fund is in the process of signing a banking arrangement with.

These banks are Absa, Albaraka Bank, FNB, Grindrod Bank, HBZ Bank, Investec Bank, Mercantile Bank, Nedbank, and Standard Bank.

Legal practitioners may not deposit trust account money or invest money in accounts held at a bank which is not a party to this arrangement, unless prior written consent of the LPFF has been obtained.

In terms of trust accounts and trust interest, the following changes should be noted:

  • Section 86(2) of the LPA replaces section 78(1) of the Attorneys Act and according to this change, the interest earned vests in the Fund and 100% of the interest earned on this trust account, less the bank charges, must be paid on a monthly basis to the Fund.
  • A trust account practice may, of its own accord, invest any money which is not immediately required for any particular purpose in a separate trust savings account or other interest-bearing account. Accounts must be opened with a bank approved by the Fund. The interest also vests in the Fund and 100% of the interest earned on this trust account, less the bank charges, must be paid on an annual basis to the Fund. This change – section 86(3) of the LPA, replaces section 78(2)(a) of the Attorneys Act.
  • Section 78(2A) of the Attorneys Act will also be replaced by section 86(4) of the LPA. According to this section, a trust account practice may, on the instructions of any person, open a separate trust savings account or other interest-bearing account for the purpose of investing any money deposited in the trust account of that practice. These accounts must be also be opened with a bank approved by the Fund. This would be on behalf of someone who the practice exercises exclusive control over as trustee, agent or stakeholder or in any other fiduciary capacity. From 1 March 2019, 5% of the interest earned from this account will be automatically be paid to the Fund from approved banks on a monthly basis.

Net interest that is currently being paid monthly and annually to the Law Societies will now be paid to the Fund and these banking details will be provided to the legal fraternity in subsequent communications from the Fund.

Approved banks will communicate directly with their legal practitioner clients how they will account and report on the 5% interest that will be paid to the Fund.

Banks will be required by the South African Revenue Services (SARS) to issue a IT3b tax certificate to the legal practitioner or the legal practitioner’s client for the 95% interest earned on any separate trust savings or other interest-bearing account.

The banks will also issue an IT3b to the Fund for the 5% interest earned on this account.

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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