Since early 2012, ABS (Alternative Business Structure) licences have been granted by the Solicitors Regulatory Authority in England and Wales. Nearly 12 years later, the introduction of a similar relaxation in Scotland may be about to happen later this year.
Creating an ABS allows a law firm to be owned and/or managed by non-lawyers. In order to have any form of non-lawyer ownership a firm must be authorised as an ABS.
There is a growing appetite for non-lawyers to be involved in the running of firms, not only to assist in the day-to-day operations including, but not limited to, finance and HR, but also to provide oversight, direction and leadership from an external perspective. Having an ABS structure also creates investment opportunities and the ability to benefit from vertical integration.
The Legal Services (Scotland) Act 2010 contains guidance on the introduction of ABSs, which will be known in Scotland as Licensed Legal Services Providers (LPs). The Law Society of Scotland is currently working on the regulatory framework for LPs to ensure existing high standards of service are maintained along with ensuring client protection is at the forefront. It is hoped this framework will be in place and ready for launching in the final quarter of 2023.
Similar to ABSs, LPs can also be owned by non-lawyers. The current legislation, however, only allows 49% non-lawyer ownership in Scotland, but we understand the regulation is in the process of changing to allow up to 100% non-lawyer ownership, to be in line with England and Wales. If an ABS in England and Wales wishes to operate in Scotland, it would have to meet the criteria for creating an LP.
The four main requirements of an LP are that a firm must:
Have a licence issued by the Law Society of Scotland;
Meet the ownership criteria, which is expected to be aligned as outlined above, though this legislation is yet to be confirmed;
Have two designated roles within the organisation - a Head of Legal Services (must be a solicitor entitled to practice in Scotland) and a Head of Practice (not required to be a solicitor or have legal training); and
Carry out key duties to ensure compliance with the regulatory scheme, compliance with the regulatory objectives and adhere to the professional principle.
The Law Society of Scotland intends to provide further updates and keep the profession advised on when there is a firm launch date and when application materials and further guidance are published.
Armstrong Watson’s legal sector specialists regularly advise law firms in England and Wales on these applications and know the process well. They assist on matters up to submitting the application and beyond.
If you are involved in a Scottish law firm that may be considering converting to an LP structure in the future, or would like more information please get in touch with our Legal Sector team, who will be happy to advise and keep you up to date with the launch. Call 0808 1445575 or email help@armstrongwatson.co.uk.
