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Keeping (t)ABS on England


It’s all change at the moment in Englandshire law firms, and what happens in England no longer stays in England. Alternative Business Structures (ABS) are all the rage, and after a gradual run up period where firms could register interest in the conversion to ABS status (with mainly personal injury firms (PI) and smaller firms doing so, some large businesses such as BT and the Co-operative group being an exception), now they’re actually real – the first three groups to be approved as ABS’ were announced on the 28th March 2012.

Mid tier and larger firms in England seems to be adopting a “wait and see approach”, watching how the smaller, more adaptable firms (and also therefore possibly those who are more hungry for a cash-injection) fare before committing themselves to any tie-ups with investors. The existing large bodies like the Co-operative Group are big enough, and well funded enough to push on and expand their existing legal services in their own direction.

The reaction to this business option in England is likely to be a good predictor of the impact of the Legal Services (Scotland)Act 2010 in Scottish law firms. The Legal Services (Scotland) Act 2010 will allow 49% non-solicitor ownership of law firms in Scotland when brought fully into force. The regulations involved in the implementation of the 2010 Act are being drafted at the moment, and will be consulted on in two lots, in the Spring and Autumn of 2012.

The recently concluded Scottish Government consultation on ABS in Scotland found that most respondents favoured the inclusion of accountants as “regulated professionals” (those who are authorised alongside solicitors to own the majority, 51% share of the company), which raises the prospect of law firms co-owned by solicitors and accountants. It’s yet to be decided what the actual professions authorised to have ownership of a law firm alongside solicitors will be.

And what sort of changes are likely for cross border Scots/English law firms? Will it be more beneficial to become an ABS under one regime than the other? And how do law firms traditionally owned by, in effect, their staff, change to a culture where they're partially owned by, and accountable to, external funders?

So, to see what a future Scottish law firm could look like, for the next year, we can watch to see how English firms deal with it…

Popcorn, anyone?
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