Alternative Business Structures

An ABS is an organisation that:

  • Is licensed to carry out one or more of the specific legal activities regulated by the Legal Aid Services Act (LSA) 2007.
  • Whose owners and/or managers include individuals or entities who are not qualified lawyers.
  • An ABS must have at least one ‘manager’ who is authorised to provide the reserved legal activity delivered by the ABS.
  • It must have at least one non-lawyer ‘manager’ or owner.

ABSs enable lawyers and non-lawyers to share management and control of a business which provides reserved legal services to the public.

ABS allows external investment and ownership of law firms.

There are 3 broad types of model for an ABS

  1. Firms that are like traditional law firms or legal disciplinary practices (LDPs) but have at least one non-lawyer manager, and which have no external ownership or provide solicitor type services only.
  2. Entities that have complete or partial external ownership, with the legal services being operated through a ring-fenced entity.
  3. The multi-disciplinary practice (MDP) model where combinations of different services are provided by one entity, for example the provision of legal services via lawyers in an entity with accountants or even estate agents. There are 12 model types; Model 5- Co-op model (external ownership, legal and non-legal services). E.g. using a corporate brand, one firm could provide a mixture of services or the ABS could provide a mixture of social welfare advice, administration and legal services.

Why were ABSs introduced?

Sir David Clementi conducted a full review of legal services regulations.

His review included:

  1. To consider what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient and independent legal sector.
  2. To recommend a framework which will be independent in representing the public and consumer interest, comprehensive, accountable, consistent, flexible, transparent, and no more restrictive or burdensome than is clearly justified.

Sir David concluded in December 2004 that the framework for the provision of legal services in England and Wales was outdated.

He stated: “Whilst some lawyers will continue to argue that the current system ‘ain’t broke’, I believe there is strong evidence of the need for major reform to the types of business structures permitted to provide legal services to the consumer.”

Sir David felt the restrictive practices regarding the structures in which lawyers could work could no longer be justified as being in the public interest.

The report identified 3 key areas that needed to be addressed:

  1. The regulatory structure itself was outmoded – it had at its heart a fundamental conflict between the roles of the regulator and the representative body. These functions should be separated and that separation should be overseen by a new oversight body namely the Legal Services Board (LSB).
  2. Complaints should be taken away from front-line regulators altogether and placed in the hands of a new statutory body, the Office for Legal Complaint (OLC).
  3. In relation to law firm ownership, Clementi’s proposal was the establishment of the ABSs which would bring together lawyers from different professional bodies such as solicitors and barristers and also permit non-lawyers to be involved in the management and ownership of such practices. Clementi did not favour the establishment of MDPs (multi disciplinary practices) or firms where the external owners were not themselves managers of the business. He thought the freeing up of the market should proceed in incremental steps.