Interpretation of the Company's System

It does not matter how the corporatization (corporate system) of law firm is defined literally, and the key is its core characteristics and signs. Understanding the characteristic and symbol of the corporatization (corporate system) of law firm is not only the starting point from which we recognize this issue, but also the base on which we will discuss this issue in the future.

1.   Demutualization of property rights

The foundation of corporatization is the organizational form and property right mechanism based on equity, which is also the basic characteristic of the corporatization of law firm. Firstly, the demutualization of property rights represents the difference from the partnership system and individual law firm. It sets up the firm in the way of forming the equity through the shareholder investment instead of the way of the partnership or individual investment. Secondly, the demutualization of property rights means the investment diversification, that is to say, the company, the individual, the lawyer and non-lawyer all can make investment. However, the personal cooperation characteristics in the lawyer industry shall be fully considered specific to the proportion of the company and non-lawyer shareholders. Lastly, the demutualization of property rights implies that the demutualization of the human capital of the lawyers shall be also carried out in the corporatization mode, which is the most difficult issue of the corporatization of law firm to be solved but that must be solved.

2.   Management systematization

In addition to the property right mechanism, the main symbol of the corporatization of law firm, the management systematization is another concentration expression of the corporatization of law firm, and it shall cover the management structuralization, professionalism and normalization. First of all, the management structuralization means that the law firms under corporatization generally set up the management committee similar to the Board of Directors, mostly the Board of Supervisors, and the direct or executive director, and other management executive levels, differing from the case that the single managing partner takes the management responsibility in the law firms under partnership system. Then, the management professionalism means that the law firms under corporatization mostly advocate and practice management specialization and clearly ask the managers to stay out of the front line of business, differing from the case that a partner holds concurrent management duties in the law firms under partnership system. Finally, the management normalization means that the law firms under corporatization mostly require the strict management system, provide the corresponding management software and platform, and even create the complete and mature management culture, differing from the casual and variable management systems in the law firms under partnership system mostly. Certainly, the law firms under partnership system also have the example of good and quite systematic management but do not strengthen it into the “Corporatization”.

3.   Product standardization

The lawyer service is a typical intelligence service industry and has no tangible products. However, the corporatization requires that the product or service shall be uniform, external, recognizable and describable. We should provide the lawyer service like a product under this requirement. First of all, the product standardization requires that we must have the product, namely, specific service items, including the name, content, etc. In the second place, the product standardization requires that we must sort, conclude and extract these services to form the service system with the clear layers and contents. Last but not the least, the product standardization requires that we must enrich its connotation, normalize its process and provide its model text on basis of the service system. Of course, the product standardization here is just the foundation and the security and does not reject the service individualization and pertinence. It is emphasized that the product standardization is mainly for the current situation of respective lawyers, various services and multifarious standards.

4.   Service branding

The branding is the inevitable goal of the corporatization. In the first place, the service branding must be on the basis of the service quality assurance, which requires us to strengthen the service quality construction and management, while the satisfactory service is the best brand advertising; In the second place, the service branding requires us to pay attention to the overall brand construction and promotion of the firm instead of endless expansion of personal resources or the propaganda of ability. In the end, the service branding depends on the product standardization and lawyer specialization because only the lawyers can really provide services and reveal the brand. The brand of the firm is built by these outstanding lawyers jointly.

5.   Marketization

The marketization represents that the practice of getting the cases by lawyer’s individual relationship or promoting and expanding the business will be replaced by the marketization model focusing on the market, depending on professional market team, and developing the business through the market strategy and means. There are mainly three connotations: firstly, change the development of the lawyer’s personal business into the market development of the law firm, integrate it into the overall market behavior, and abandon the self-employed behavior; secondly, set up a special marketing department and build the special market team instead of lawyers taking the responsibility for marketing; lastly, expand the business thought the market means rather than personal resources or non-marketing means. The marketization requires us to change from the individual business behavior to the team behavior and from the resource repentance to resource development, and transit from the business to the technology and transform from the contingency to the necessity.

6.   Distribution integration

The law firms mainly have two distribution mechanisms, i.e., the commission system and payroll system (not including the distribution of partners), while the specific execution is varied. Strictly speaking, neither system is directly linked to corporatization, but the corporatization requires the integrated distribution. The “integration” has three connotations: firstly, whatever the mechanism is, the distribution is the affair of the firm rather than the lawyer’s and shall be carried out by the firm as a whole; secondly, the firm can only have one distribution system instead of two or more distribution systems, which does not mean that the firm has to choose one of the commission system and payroll system, and it can combine them or innovate and develop them; lastly, this distribution mechanism excludes the loose cooperation and distribution modes, such as overall rationing system and dutch treatment.

7.   Limitation of liability

The company shall be liable for its debts with all its property and the shareholders shall be liable for the debts of the company subject to their investments, which are two connotations of the “limited liability” of the corporatization and is the biggest difference from the individual and partnership law firms where it is required to assume the unlimited liability. Although the revised Law on Lawyers has allowed the “special general partnership”, there is still a long way from the real sense of the limited liability. The Administrative Measures for Law Firms of the Ministry of Justice also makes strict limits, so this form is not universal. Hence, only the true corporatization can realize the limitation of liability thoroughly.

In these characteristics, the demutualization of property rights and the limitation of liability are specific to the strict corporate system of law firm, and the other five characteristics are specific to the corporatization of law firm. As a matter of fact, the core of the corporatization of law firm emphasizes the integration (management, operation and distribution) and enterprization (standardization, marketization, branding), which is also the concentrate embodiment of the difference between a company and a partnership in the aspects of the compactness, management structure, operation mechanism, distribution mode, development mode, etc.