Appendix A
Succession Challenges in the Event of a Sudden Unplanned Closure of a Firm

NOTE: This appendix is adapted from Alberta Association of Architects’ Practice Advisory “Succession Planning.” It addresses issues of unplanned succession when a firm must close on short notice without a succession plan.

This information is intended to focus on the forced dissolution (rather than the sale) of a practice, by the estate of the firm’s principal or its legal counsel in connection with, but not limited to, sole practitioners, caused by sudden death, permanent illness or disability, and in the absence of a partner or shareholder(s) who own the authority to carry on the business. To a lesser degree, this type of dissolution can also be triggered through divorce, dispute, personal choice or bankruptcy.

While a majority of small firms dissolve upon the retirement of the principal architect or licensed interior designer without a succession plan, per se, there should nevertheless be an emergency contingency plan in place to protect family, estate and the residual obligations of the practice itself against personal loss or liability. This also goes to the protection of the public interest.

Many of the guiding principles of succession as described in detail in this chapter remain applicable here and members are advised to review this manual with their legal counsel and insurer.

The following are major recommendations:

  • Any dissolution must comply with the provincial regulations in effect at the time of dissolution.
  • There should be a liability insurance policy in place that inures to the benefit and protection of the estate. Generally, liability for past work remains with the practice for the period of time prescribed in applicable statutes of limitations legislation. It is important to insure against liability, post dissolution.
  • The work products of the practice, such as files, drawings and contractual data, should never be lost or destroyed but instead retained, for a time period consistent with the statutes of limitations of an architect’s liability. These drawings and documents can be transferred to another architect, an archiving or storage agency, or legal counsel. For more detailed information in this regard, contact your professional liability and general liability insurers.
  • Above all, the intent is to facilitate an organized shutdown plan and transition of all matters related to the practice through legal counsel, accountants and insurers with minimum inconvenience and impact on family and the estate with regard to ongoing and outstanding business obligations.

The following is a checklist that can be considered as a guide when seeking legal counsel advice to suit a specific practice. The checklist is not exhaustive, but outlines major subject areas relating to the dissolution of a practice.

NOTE: Contingency business planning is not static. Many of the listed items should be updated in accordance with normal accounting procedures on a regular (preferably monthly) basis.