Alternative business structures

Mid-market law firms are responding cautiously to the changing legal services market, with just 14% saying they are actively considering external investment and 21% anticipating a merger or major restructuring in the next year, according to new research.

Solicitors who offer financial services and plan to become alternative business structures could be forced out of the market by plans to plug a gap in consumer protection created by the Legal Services Act, the Financial Services Authority has admitted.

The Solicitors Regulation Authority has already received “strong interest” in ABS investment from abroad and from non-English law firms that want to use the structure, it has revealed. They includes one of China’s largest law firms.

The rule which prevents solicitors and in the future alternative business structures (ABSs) from hiving off unreserved legal work into unregulated businesses may stifle new entrants to the market, the Legal Services Board has warned. The board is now considering a review of the rule’s “continuing relevance”.

Competition from alternative business structures has emerged as a significant worry to top law firms, a new survey has shown. While the finance directors at the top 100 firms were most concerned about the impact on profitability of downward pressure on fees from clients, 46% said the consequences of deregulation are a high or medium risk to profits.

Law firms will need a turnover of at least £75m to list on the stock exchange, a leading investment banker said this week. This is because “the public markets prefer larger businesses at the moment” and smaller ones may struggle with liquidity.

Alternative business structures should not be introduced until stronger provisions are put in place to stop those convicted of dishonesty from taking a stake in them, a leading Conservative peer has said. Lord Hunt of Wirral called on the government to introduce exceptions to the Rehabilitation of Offenders Act 1974.

Law firms are reporting diminishing interest in external investment and alternative business structures, a new survey has found. The Legal Services Act Index, produced by Baker Tilly, found that 50% of respondents were considering an outside investor, compared to 60% last autumn.

The Institute of Chartered Accountants in England and Wales (ICAEW) is investigating how it can license accountancy firms to become alternative business structures and provide legal advice to clients, Legal Futures can reveal. The ICAEW is set first to apply for the right to regulate its members to provide reserved probate activities.

The Legal Services Board is to recommend to the Lord Chancellor that the Law Society – through the Solicitors Regulation Authority – become an alternative business structure licensing authority. However, there has been a disagreement over the separate business rule.