SRA in “serious discussions” with 15 would-be ABSs

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By Legal Futures

27 October 2011

Townsend: working hard to ensure the New Year target will be met

The Solicitors Regulation Authority (SRA) is in “serious discussions” with just 15 potential alternative business structures (ABSs), it has emerged.

According to the SRA, six different types of organisation have so far shown official interest in becoming ABSs: law firms, claims management companies, major retailers, accountancy firms, loss adjusters and private equity houses.

With the SRA likely to start accepting ABS applications in December, and license the first ones in late January or early February, it has received around 500 general enquiries over the summer and early autumn. It believes that many potential ABS are watching and waiting for the initial rush to pass.

Revealing the details at a Claims Management Magazine event – reported by Legal Futures Associate Eclipse Legal Systems, which sponsored it – chief executive Antony Townsend also once again defended the authority over the delay in licensing ABSs.

“We did our best to be ready for 6 October,” he said. “We are now working hard to ensure the New Year target will be met. We will keep up the political pressure in order to deliver. I do appreciate it is a very difficult position for those who have carefully drawn-up business plans.”

Meanwhile, Liberal Democrat MP Tom Brake – who co-chairs the party’s backbench committee on home affairs, justice and equalities – has put down an early day motion in Parliament in response to the Solicitor Sole Practitioners Group’s last-ditch campaign to derail ABSs.

It says: “This House recognises the concerns of the Solicitor Sole Practitioners Group, which represents a third of the total number of law firms in England and Wales, regarding the introduction of alternative business structures as permitted under part 5 of the Legal Services Act 2007; is concerned that alternative business structures threaten to undermine the independence of legal advice and reduce access to justice for the most vulnerable; and calls for a debate on legislation relating to alternative business structures.”

The motion was tabled on 18 October and the only other two signatories to it so far are Conservative MP Peter Bottomley and Labour’s Valerie Vaz.

So far 171 people have signed the group’s anti-ABS petition on the government’s e-petitions website. It needs 100,000 to make it eligible for debate in Parliament.

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One Response to “SRA in “serious discussions” with 15 would-be ABSs”

  1. As someone who has been providing strategic guidance to a number of businesses who are interested in adding legal services to their existing model, I always emphasised that ABS was a higher risk strategy than some more methodical business models which achieve the same commercial outcome and are more acceptable to PI insurers. The fact that there are only 15 reflects two things. Firstly, that the penny is starting to drop about PI insurer requirements. Remember, its not just a case of hiring a lawyer and getting a licence. Secondly, the combination of the Carter/Jackson reforms and uncertainty about the landscape means that only those businesses who have substantial resource, and therefore can be in the first tranche knowing what the risks are will be able to make the first moves. I imagine of the 15, most are very large organisations indeed. It is therefore clear to me that uncertainty over the future landscape, the realisation of PI insurer requirements and a lack of resource means that the higher risks involved in ABS has turned off many of the smaller interested businesses. Whilst the wait and see approach is something I have personally advocated, it does appear, at least to me, that there are a number of alternatives to ABS which are lower risk, higher return and enable the same commercial goals to be achieved without risking the whole business. The opportunity of ABS is neither appropriate or attractive to many, but is for some. However, there are a whole range of additional opportunities that are out there which ABS is not necessarily an appropriate model for. Interesting times indeed!

  2. Martin Callan on October 27th, 2011 at 2:18 am

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