Rule 1:21-1A. Professional Corporations for the Practice of Law

(a) Attorneys may engage in the practice of law as professional corporations in the same manner as an individual or a partnership may engage in the practice of law, provided that:

(1) All provisions of the "Professional Service Corporation Act" (N.J.S.A. 14A:17-1 through 18) shall be complied with. (2) The professional corporation shall comply with and be subject to all rules governing the practice of law by attorneys and it shall do nothing which, if done by an individual attorney would violate the standards of professional conduct applicable to attorneys licensed to practice law in this State. Any violation of this rule by the professional corporation shall be grounds for the Supreme Court to terminate or suspend the professional corporation's right to practice law or otherwise to discipline it. (3) The professional corporation shall obtain and maintain in good standing one or more policies of lawyers' professional liability insurance which shall insure the corporation against liability imposed upon it by law for damages resulting from any claim made against the corporation by its clients arising out of the performance of professional services by attorneys employed by the corporation in their capacities as attorneys. The insurance shall be in an amount for each claim of at least $100,000 multiplied by the number of attorneys employed by the corporation, provided that the maximum coverage shall not be required to exceed $5,000,000 for each claim, and further provided that the deductible portion to such insurance shall not exceed $10,000 multiplied by the number of attorneys employed by the corporation or $500,000, whichever is less. The corporation may enter into an indemnity agreement with its insurer under which the corporation agrees to indemnify the insurer for losses in excess of the amount of the permitted deductible, provided that the insurer remains liable to pay all judgments against the corporation up to the policy limits regardless whether the corporation indemnifies the insurer as required under the indemnity agreement.

(b) Within 30 days after filing its certificate of incorporation or, in the case of a foreign professional legal corporation, the filing of its registration with the Secretary of State, each professional corporation formed to engage in the practice of law shall file with the Clerk of the Supreme Court a certificate of insurance, issued by the insurer, setting forth the name and address of the insurance company writing the insurance policies required by paragraph (a)(3) of this rule and the policy number and policy limits. The professional corporation shall also file such other information as the Supreme court may from time to time prescribe. Amendments to and renewals of the certificate of insurance shall be filed with the Clerk of the Supreme Court within 30 days after the date on which such amendments or renewals become effective.

(c) The corporate name of the professional corporation shall comply with the provisions of RPC 7.5 and shall contain only the full or last names of one or more of its shareholders or members of a predecessor firm, whether the shareholder or member be living, deceased or retired. Wherever the corporate name of the professional corporation is used it shall be followed by the phrase "A professional corporation," or by any other phrase or abbreviation authorized by N.J.S.A. 14A:17-14 to indicate that it is a professional corporation. When the professional corporation is a foreign professional legal corporation, the phrase shall also identify the state of incorporation (e.g., "A professional corporation incorporated in the State of New York"). The corporate name shall be used on all pleadings, correspondence or other documents. Correspondence, pleadings and other documents executed in connection with the practice of law shall be executed on behalf of the corporation by one of its attorney employees. Corporate documents executed other than in connection with the practice of law may be executed on behalf of the corporation by an authorized employee who is not licensed to practice law.

(d) No person shall hold any shares of stock in any professional corporation engaged in the practice of law unless actually and actively engaged in the practice of law as an employee or agent of, or "of counsel" to such corporation, except for leave of absence not to exceed one year and for absences on account of illness, accident, time spent in the armed services and vacation, and except that the legal representative of the estate of a deceased shareholder and a shareholder disqualified from the practice of law may continue to hold shares of stock in the professional corporation for the period provided for in the Professional Service Corporation Act, as amended and supplemented, but without the right to receive as a shareholder any portion of the earnings or profits of the corporation derived from professional services rendered by the corporation subsequent to the date of death of the deceased shareholder or the date of disqualification of the disqualified shareholder, as the case may be. A professional corporation actually and actively engaged in the practice of law may hold shares of stock in another professional corporation covered by this rule.

(e) The Board of Directors of a professional corporation for the practice of law shall consist of one or more persons, all of whom shall be licensed to practice law, and at least one of whom shall be licensed to practice in New Jersey. Such directors need not be shareholders. Officers of the professional law corporation need not be licensed members of the New Jersey bar unless the corporation is a domestic professional legal corporation, in which case the president shall be so licensed.

(f) A professional corporation may engage in the practice of law in partnership with another professional corporation or corporations, or with an attorney or partnership of attorneys. The partnership name shall, in addition to meeting the requirements of Rule 1:21-1A(c), be followed by the designation "a partnership of professional corporations" or "a partnership including professional corporations." When any member of a partnership is a foreign professional legal corporation that is incorporated in a state other than New Jersey, the required designation shall also state this fact. When the professional corporation is engaged in the practice of law in partnership with another corporation, partnership, or attorney, all disciplinary rules and rules of practice applicable to partnerships of attorneys will apply.