Alternative business structures

On 6 October 2011 the first alternative business structures (ABS) will be able to open for business within the legal service market in England and Wales, under part 5 of the Legal Services Act 2007.

Commonly dubbed by the press as “Tesco Law,” (despite the fact that this retailer is yet to fully confirm its intention to enter the market) this is a new type of arrangement for the ownership of law firms and means that for the first time an ordinary business man or woman will be able to fully own and invest in a law firm, without ever having practised as a solicitor.

It seems likely that firms of this nature will begin to develop in one of two basic forms; either as a traditional law firm owned by non-lawyers, or as a “one stop shop” offering a package of related services, for example a property based ABS offering conveyancing, mortgages and insurance services.

The main reason for the change is to create competition within the industry and benefit the consumer by lowering prices and offering better access to a wider range of legal services. It is also hoped that greater flexibility within the sector will allow for an increase in employment levels, something which is surely to be welcomed in bleak economic times.

But while the concern is that big branded retailers like Tesco, the AA and Barclays Bank may begin to offer straightforward legal services, such as will drafting or simple conveyancing, consumers should rest assured that their standard of service must be of the same level as a well-established law firm. The Legal Services Act 2007 guarantees that a non-lawyer manager or shareholder will not be able to compromise the professional ethical duties of any lawyer in the firm, and that all ABSs will be regulated by the same standards and principles as other legal service providers.

In reality, until ABSs begin to trade as a business, the full effect they will have remains unknown. Some predict a mass consolidation within the legal sector in the next five years. Others suggest that businesses and the public will still prefer to use solicitors as they have the unique selling point of being trusted, qualified advisers in the field. Perhaps the main challenge for lawyers will be to demonstrate why their clients should continue to use them for all their legal matters, and show the added value solicitors can bring to a particular piece of work.

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