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The future’s unknown for Alternative Business Structures

Eimear McCartan – Trainee Solicitor – Corporate

The topical issue of Alternative Business Structures (ABSs) came to the fore once again on the front page of this weeks issue of the Law Society Gazette.

The chief of law firm DLA Piper, Sir Nigel Knowles, has voiced warnings about the potential consequences the upcoming introduction of ABSs will have when introduced on the 6th October this year.

The introduction of ABSs means the entire system of ownership for legal services will undergo a potentially dramatic change as for the first time non-lawyers can invest in and own legal businesses. Up until now, lawyers have been the sole owners of legal businesses. Under the new regime introduced under the Legal Services Act 2007, ownership of legal services will open up to anyone deemed “fit and proper” depending on their share of ownership of the business.

Some are in favour of the new system of ownership, welcoming the fact this will increase competition between existing legal firms and introduce new entrants to the market, thus benefiting the client and driving down prices. Supporters have also highlighted the fact it will open up new doors for solicitors themselves, increasing career options and broadening the scope of the profession.

However, those in opposition have strongly voiced their concerns over the impending introduction of the regime. Critics suggest that introducing non-lawyers into the market could undermine the quality of the entire legal profession. Some major supermarkets, banks and insurance companies have already expressed an interest in participating in the sector, which has led some to dub the introduction of ABSs as “Tesco law.” In addition, some see the change as yet another front to be fought, with law firms already battling a depressed market, legal aid cuts and the Jackson reforms. Many predict that the introduction of ABSs will sound the death knell for small high street firms unable to compete with the giants of the retail sector.

The reality is that until ABSs are introduced on the 6th October, the true effect they will have is still unknown. Some predict mass consolidation within the legal sector in the next 5-10 years. Others suggest that clients will still prefer to use solicitors as they have the unique selling point of being trusted, qualified advisers in the field.

Whatever the future, one certainty is that the legal sector is going to have to adapt to cope with the new entrants to the market. For some this will prove a massive challenge, whilst for others the opportunities may be great. Either way, the time has now come to prepare for change.