30 March 2012Print This Post

In-house lawyers face ABS dilemma

General public: organisations will have to decide whether they need to become an ABS

Organisations whose in-house solicitors provide reserved legal activities to people other than their employer – such as insurers, associations and local authorities – will have to decide for themselves whether by law they need to become alternative business structures (ABSs), according to the Solicitors Regulation Authority (SRA).

In a four-week consultation issued this week, the SRA said employers will need first to consider whether section 15(4) of the Legal Services Act 2007 (LSA) requires them to become an ABS.

Section 15(4) says in-house lawyers offering reserved legal activities to “the public or a section of the public” must do so from an ABS.

The consultation says: “Because of the potential difficulties in determining where services are provided to the public, the SRA’s rules cannot establish a clear line to

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delineate all circumstances in which organisations are able to permit their in-house lawyers to provide reserved legal services without the body itself obtaining LSA authorisation [as an ABS].”

Only if the organisation decides it does not need to become an ABS should it look to rule 4 of the SRA’s practice framework rules, which details 12 situations when solicitors working in-house for an organisation which is not a regulated legal business can provide services to people other than their employer.

These include acting for work colleagues, related bodies, members of an association (where the association is the employer) and policyholders where the employer is an insurer.

The change might also catch in-house lawyers undertaking certain pro bono work.

There have been transitional arrangements in place while the SRA tried to sort out this issue, which will come to an end on 21 June. Pending the outcome of the consultation, there will then be a new edition of the SRA Handbook published with the revised rule 4, the fourth since it was launched last October.

In the meantime, the forthcoming third edition will include new guidance notes to rule 4 that aims to draw attention to the statutory position.

The SRA said the consultation is not intended as a wider review of in-house practice, which it expects to undertake later this year.

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