Alternative business structures
Alternative business structures (ABSs) will enable legal professionals and non-lawyers to share management and control of a practice.
ABSs will allow outside investment and ownership of law firms, making possible. The Government's view was that this would be beneficial because it would enable:
- increased efficiency and economies of scale
- increased access to finance for expansion and investment in big projects like IT
- a single point of convenient and potentially complementary services with banks, retailers and others
- the ability to reward good non-legal staff with partnership or share ownership in the same way as legal staff, so making it easier to recruit and retain able people.
Legal disciplinary practices
Legal disciplinary practices (LDPs) are practices where up to 25 per cent of partners or equivalent managers are non-lawyers, without any external ownership.
The Law Society, through the Solicitors Regulation Authority, has authorised such firms since March 2009.
LDPs with non-lawyers will need to become ABSs by October 2012. The Solicitors Regulation Authority ( SRA ) will put in place transitional arrangements for these firms. LDPs with non-solicitor lawyer managers will not need to become ABSs.
Key safeguards
The Society supports the liberalisation of regulation relating to the entities through which solicitors can provide services, provided that there are adequate safeguards to protect clients and the public.
The Legal Services Act 2007 provides that:
- ABSs will be regulated by the same standards and principles as other legal services providers.
- non-lawyer manager and shareholders will not be able to compromise the professional ethical duties of lawyers
- regulators must take into account the impact on access to justice when developing application rules for ABSs.
Common standards for regulators
All bodies licensing ABSs must also be authorised as an approved regulator of legal services by the Legal Service Board (LSB).
They will need to prove to the LSB that they are competent to regulate.
The act includes requirements for all licensed ABS firms, and common standards to be met by all ABS licensors.
Avoiding improper influence by non-lawyers
The act states specific measures to avoid improper influence by non-lawyers, including:
- any firm with non-lawyer partners, directors or shareholders must be licensed as an ABS.
- all non-lawyers involved in an ABS have a statutory duty not to cause or contribute to a breach of legal professional duties by the firm or anyone within it.
- ABS regulators can ban defaulting non-lawyers from any future involvement in ABS firms, and can fine and revoke the licences of an ABS .
- any shareholder, including a partner or director, wishing to own 10 per cent or more of an ABS must be certified as fit and proper by the regulatory body. The potential shareholder bears the burden of proof.
- ABS regulators can attach conditions to investors, or even divest them of their shares, if they fail to meet the prescribed standards.
More information
Read about the Legal Services Act
Read more about the Legal Services Board
Read about the complaints handling arrangements
Frequently asked questions about the act