SRA in surprise move to revisit guidance on pre-ABS deals with external investors

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By Legal Futures

10 September 2010


Townsend: not trying to inhibit people from making preparations

The Solicitors Regulation Authority is to revisit at its next meeting the question of whether to relax its rules on preparations in advance of the launch of alternative business structures (ABSs) next October.

In an unexpected move, at a meeting of the SRA board in London today it was agreed that the July 2009 guidance on what preparations are acceptable in the run up to ABSs would be re-examined to take into account of the concerns of board members.

Several members complained that the current guidance lacked clarity over the extent to which arrangements could be entered into between solicitors and prospective external owners, subject to safeguards, before October 2011 – especially for those firms and investors that want to be in the first wave of ABSs and so need to advance their discussions.

The board had been expected to approve a position paper which simply confirmed the July 2009 guidance (see story). The paper was prompted by suggestions that the guidance be relaxed to allow binding agreements on ownership before October 2011.

Several pre-emptive attempts to enter into ABSs have so far led to enforcement action, the paper said, and “have tended to result in agreement to unravel the non-compliant arrangements”.

Summarising the discussion, SRA chief executive Antony Townsend said the board was agreed on the principle that those in control of law firms must be subject to regulation. He added: “What we are trying to do here is not to inhibit proper discussions and preparations, but we are trying to avoid the position in which between now and 6 October de facto control of law firms goes to people over whom we have no regulatory control.”

SRA chairman Charles Plant said the board would go away and re-examine the July 2009 guidance to see if it could be “refined” to meet concerns raised by board members. The matter will be discussed again at the next SRA board meeting on 15 October.

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