Bar Council finally reverses its own ban; allows law firms to use virtual offices

Malaysia’s Bar Council (“BC”) today announced, via Circular 324/2021 to its members, that after more than six years, it is finally reversing its own ban on law firms operating via virtual offices.

This issue first arose in March 2015, when the BC suddenly issued a Circular immediately banning lawyers from practising through virtual offices. The BC asked lawyers to “cease such operations with immediate effect” and warned that “the Bar Council may take disciplinary action against lawyers who are reported to be operating through virtual offices”. The ban was put on hold temporarily as a group of lawyers requested a discussion with the Legal Practice Committee, but in August 2015 the BC made a firm decision to ban the practice.

Lawyer Foong Cheng Leong published a good summary of the BC’s ban here: Malaysian Bar Council bans lawyers from using virtual offices.

At the time, international legal industry commentator Stephen Furnari said that the BC’s decision was “a perplexing decision that’s a substantial departure from recent trends in legal ethics” and that the reasons given by the BC were “baseless and, in fact, demonstrate a lack of understanding about the way lawyers use virtual offices.” He also added that while “regulatory bodies around the world are generally looking for ways to liberalize the practice of law, not make it more restrictive […] the Malaysian Bar Council is on the wrong side of history here.”

The BC has a history of stifling innovation, and I’ve previously shared my views on this with The Malay Mail (Lawyers want Bar Council to stop fighting innovations, move with the times). In that same interview, Cheng Leong also shared his frustrations with the BC’s decision to ban virtual offices, saying: “Don’t ban virtual offices. Regulate them.” It has taken some time, but six years later, the BC have finally taken his advice.

I’ve also previously shared my views on the BC’s approach to innovation, which has killed off many startups in the legal space over the years, and has been a significant barrier to Malaysian lawyers moving with the times: “Instead of being a denier and disabler of innovation, the Bar Council should be assisting lawyers to innovate and give lawyers a chance to keep up with the technological advancements seen in other industries. Otherwise, lawyers may find themselves unfairly handicapped by strict rules which limit their ability to compete with the new compelling alternatives being offered by non-lawyers.”

The BC’s decision to reverse its ban is therefore welcomed with much relief. The BC has given effect to this with amendments to the Rules and Rulings of the Bar Council (“BC Rulings”), with new Rulings 7A.01, 7A.02, 7A.03, 7A.04 and 7A.05, and an amendment to Ruling 7.03.

In short, a law firm using a virtual office must —

  • only be located at one physical business address;
  • continue to comply with all the provisions of Chapter 7 of the BC Rulings;
  • notify the BC of the firm’s address, other contact details, and details of the virtual office provider, and keep the BC updated of any changes; and
  • notify the public that the physical address and its facilities and services are shared by other parties.

The lawyers must also take all due and necessary precautions to prevent the inadvertent or unauthorised disclosure of or access to, information relating to the representation of a client to other parties. This includes requirements in relation to confidentiality agreements with the service provider, and specific safeguards in relation to the manner in which documents and correspondence are received, stored, and sent out.

Full details can be accessed via the full Circular and the BC Rulings.

Responding to this decision, Cheng Leong said: “It’s good that the Bar Council has finally lifted the ban on virtual offices. However, the Bar Council back then made a very poor decision in prohibiting it, causing much inconvenience to many members who were utilising such services. A virtual office is clearly very beneficial to members, even before the pandemic. It shouldn’t have been prohibited in the first place.

Lee Shih also welcomed the decision to reverse the ban: “A year and a half after lockdown, this is a good reversal of the Bar Council’s earlier ban on virtual offices. I agree that it is indisputable that a virtual office has benefits like flexibility and cost-effectiveness. It has taken us a few years, but this allows lawyers to adopt nimble and new ways of working.

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