Does your firm need to be authorised as an ABS?

7 March 2012

Introduction

This guide is intended to help you decide whether or not an entity that you intend to set up—or an existing traditional law firm that is considering external ownership and/or non lawyer managers—needs to be to authorised as an ABS. ABS are a new form of practice that can provide reserved legal activities to the public.

Compared to a traditional law firm, ABS are more flexible, in that

• lawyers and non-lawyers can share the management and control of businesses,
• ABS can have external investment and ownership,
• an ABS can offer multiple services to clients (including legal services) from within the same entity (known as a multidisciplinary practice).

To become licensed as an ABS, applicants must meet standards and requirements set out in the SRA Handbook. Our emphasis in considering applications for licences is on ensuring that shareholders with a material interest and managers satisfy the SRA Suitability Test and that all entities applying for authorisation meet our criteria for authorisation.

Firms that need to be authorised as an ABS

The need to be authorised as an ABS depends on

• the activities that the entity intends to conduct,
• who will be managing and owning the firm.

Reserved legal activities

Any entity wishing to provide services to the public (or a section of the public), which includes one or more reserved legal activity, must be authorised by a licensing authority such as the SRA. The reserved legal activities are

• the exercise of a right of audience,
• the conduct of litigation,
• reserved instrument activities,
• probate activities,
• the administration of oaths,
• the provision of immigration advice and services, and
• notarial activities. (The SRA is not an licensing authority for notarial activites.)

Non-lawyer involvement

Firms with at least one lawyer manager which are intending to have non-lawyer managers or interest holders will need to be authorised as an ABS. By non-lawyer we mean a non-authorised person which is defined in the Legal Services Act 2007 (LSA) as a person which is not

Notes

A firm which has a small amount (less than 10 per cent) of indirect non-lawyer involvement is not licensable (see section 72.2 of the LSA). Indirect involvement in this context means that the involvement is in another body which is itself a manager or interest holder of the firm. There could be a number of non-lawyers indirectly involved in the firm in this way, provided that their total involvement remains below 10 per cent. These firms can apply for authorisation as recognised bodies (subject to the firm having at least one manager who is a solicitor or REL or (if the firm is a partnership or LLP), a body corporate which is a legally qualified body which has itself at least one manager who is a solicitor or REL).

Organisations which are special bodies, as defined by section 106 of the LSA, have the benefit of a grace period and do not need to be authorised as an ABS until March 2013. Until then, they can apply for authorisation but cannot apply for an order for special treatment by the SRA. Special bodies are independent trade unions; not-for-profit bodies; community interest bodies or any other body prescribed by order of the Lord Chancellor.

Does your firm need to be authorised as an ABS?

Our decision tree will help you to consider whether your firm needs to be authorised as an ABS.

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