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SRA lays out what firms can and cannot do to prepare for ABSs


Limits of contact: firms can talk to external investors but not reach firm agreements at the moment

The Solicitors Regulation Authority (SRA) has outlined the steps that law firms are able to take under the current rules in preparing to become an alternative business structure (ABS).

Updating its July 2009 Preparing for ABSs guidance – which just highlighted what solicitors should not do – the SRA says that it is “keen to enable firms to make appropriate preparations for the setting up of ABS” within the scope of the present law and professional rules, with issues such as maintaining independence to the fore.

It said these can include:

However, the SRA warned that the detail will be key. “For example, it is possible that certain conditional contractual arrangements could amount to a breach of current rule 14 of the Code of Conduct by creating a third-party interest over the existing ownership rights in the firm.”

The new guidance makes it clear that for the time being non-lawyer individuals or businesses cannot have any ownership interest in a law firm, or exercise any control or management over one (beyond legal disciplinary practices). Examples of arrangements that firms cannot currently enter into include:

However, depending on the circumstances, the guidance says it is possible that firms can apply for waivers from these requirements. SRA now has an ABS team in place to deal with queries. The authority expects to publish its regulatory requirements for ABSs in May 2011 ahead of accepting applications from August.

To read the guidance in full, click here [2]. The ABS team can be contacted at ABScontact@sra.org.uk [3].