Legal Services Act FAQs
Last updated 8 February 2010
You probably have many unanswered questions about
- how the Legal Services Act 2007 will affect you, and
- what opportunities it will bring.
We hope these FAQs will help. To choose from a list of FAQs, click on Quick links to content above.
You may also be interested in our FAQs on alternative business structures.
If you have any other questions, please email us at LSA@sra.org.uk.
Legal Services Act basics
What does the Legal Services Act do?
The Legal Services Act does three main things.
- It creates the Legal Services Board (LSB) to supervise the regulation of legal services by all approved regulators, such as the SRA, the Bar Standards Board and the Council for Licensed Conveyancers.
- It creates the Office for Legal Complaints (OLC)—a new independent ombudsman service to deal with all consumer complaints about legal services. The OLC will cover the work of all lawyers and will deal with redress—not with regulation.
- It enables new forms of legal practice to develop—both legal disciplinary practices or LDPs (firms involving different kinds of lawyers, and up to 25 per cent non-lawyers, but still providing legal services) and alternative business structures or ABSs, which will allow external ownership of legal businesses ("Tesco law"), multidisciplinary practices (providing legal and other services) and many things in between.
What's happening with the Legal Services Act?
Several things have happened since the Legal Services Act was made in October 2007.
- The chair (David Edmonds) and the board members of the Legal Services Board (LSB) have been appointed so that the board can fully take up its role (to supervise approved regulators etc.).
- The chair and the board members of the Office for Legal Complaints (OLC) have been appointed, so that the OLC is fully operational (to handle complaints) by late 2010.
- In July 2008, the SRA Board made a package of amendments to the rules and regulations to support LDPs and firm-based regulation. These rules and regulations have been effective since 31 March 2009.
- ABSs can't be authorised until the LSB has decided the detail of its new licensing scheme and approved regulators such as the SRA apply to the LSB to become licensing authorities for the purpose of regulating ABSs. It is likely to be the latter half of 2011 before ABSs will be able to apply for a relevant licence to operate. So, beware of jumping the gun. Add sra.org.uk/LSA to your favourites, and visit us regularly for the up-to-date position.
What is an LDP?
An LDP or legal disciplinary practice is the phrase that David Clementi used to describe the first new type of practice permitted by the Legal Services Act. For consistency, we have continued to use the description. LDPs can be owned and managed by a combination of different types of lawyer, and up to 25 per cent non-lawyers. There can be no external ownership of an LDP.
Who will regulate LDPs?
Existing front-line regulators—such as the SRA and the Council for Licensed Conveyancers—are able to regulate LDPs. Some LDPs may have a choice of regulator depending on the services they want to provide. Approved regulators will only be able to regulate firms providing a particular range of legal services, depending on the scope of the particular regulator's authority.
When can we set up an LDP?
You have been able to set up an LDP since 31 March 2009.
What is an ABS and how can I find out more about them?
For information on this, please see our FAQs on ABSs.
Terms and concepts
What do you mean by "firm-based regulation"?
We mean the application of our regulatory powers, when appropriate, to the firm as an entity rather than through individual solicitors. The Legal Services Act requires that, in order to do reserved legal work for the public, both the individual and the firm must be authorised. The Act facilitates this by giving the SRA new powers to
The Act also gives the SRA and the Solicitors Disciplinary Tribunal new powers to impose sanctions on firms, and in relation to non-solicitor managers and employees.
Of course, it will still be appropriate in many situations to apply sanctions to individuals—for instance, striking a solicitor off the roll for dishonesty—as well as, or instead of, applying them to the firm. For more information, see our consultation Better regulation: A new approach to regulating legal services firms and solicitors—please note that this closed on 31 March 2009.
Why do I keep hearing references to "managers" of firms?
The Legal Services Act uses the term "manager" to mean
- a partner in a partnership,
- a director of a company, or
- a member of a limited liability partnership (LLP).
This is reflected in the amended Code of Conduct.
The term is used in relation to managers of all firms and not just LDPs and ABSs.
I've heard that all firms need to be "recognised". What does this mean?
Since the adoption of firm-based regulation on 31 March 2009, all partnerships need to be recognised bodies. The regulatory framework now applies to the firm (as well as to individuals in it), whether it is a partnership or a corporate practice.
Are sole practitioners treated differently from other firms?
The Legal Services Act brings in a separate system for sole practitioners. Since July 2009, anyone wanting to practise in England and Wales as a sole practitioner (solicitor or registered European lawyer) needs to be authorised by the SRA as a recognised sole practitioner. This means that we can regulate sole practitioners in the same way as recognised bodies.
Passporting: Moving into the new regime
We were "passported"—what does this mean?
When we adopted firm-based regulation on 31 March 2009, existing partnerships automatically had their records updated to reflect their new recognised-body status.
In a separate process on 1 July 2009, sole practitioners then practising were passported to become recognised sole practitioners. The separation of these processes was purely to help us manage resources and ensure the processes were carried out efficiently and with minimal impact on the profession.
All passported partnerships and sole practitioners should have received a letter from us confirming the new status of their partnership or practice and the firm's SRA number.
Was our insurance affected by passporting during the indemnity year?
No. Existing indemnity insurance policies of partnerships and sole practices were unaffected by passporting. Equally, your existing insurance would not be affected by the firm becoming an LDP. However, you must keep your insurer informed. LDPs require qualifying insurance in the same way as any other practice.
We intend to convert our partnership to become an LLP—does passporting cover this?
No. Although, with passporting, your partnership will now be a recognised body, if you convert the firm you will need to make an application for recognition of the new LLP.
Will the changes affect the practising certificate fee and how I renew my practising certificate?
Changes required by the Legal Services Act will impact on the annual practising certificate renewal process. With firm-based regulation, we now have an annual renewal process for all firms, including recognised sole practitioners, which links to the annual practising certificate exercise for individual solicitors.
We don't intend to make significant changes to the fees paid for practising certificates straight away. We are working on the development of an appropriate and fair system of fee allocation and collection and have recently consulted on this. We propose to make changes in an evolutionary way, where possible, so we are unlikely to implement significant changes to the fee structure before November 2010. In the meantime, the main expense of regulation will continue to be through the practising certificate fee.
If I want to set up a new firm, what do I need to do?
Before starting to practise, you need to apply for recognition of your new firm as a recognised body, whether it is a partnership or a corporate practice. If you want to be a sole principal, you need to apply to be authorised as a recognised sole practitioner. There are application forms (RB1, RB2, RB3) for new recognised bodies, and application form RSP1 for new recognised sole practitioners. If your recognised body is to be an LDP with any non-lawyer managers, you will also need approval for the non-lawyer(s)—there
is an application form (NL1).
Sole practitioners: the new approach
I am already a sole practitioner but I've heard that I now need to be recognised—what does this mean?
From 1 July 2009 any solicitor who wants to practise on his or her own account will need to be a recognised sole practitioner. On 1 July 2009 existing sole practices were passported to become recognised sole practitioners. See the passporting section above for more background details.
I want to set up a sole practice. What do I need to do?
Before setting up, you need to apply for initial approval to be a recognised sole practitioner on form RSP1, which is similar to the application for firms to be granted recognised body status. Please submit your application at least four weeks before you want to begin practising through your new firm (as you cannot set up until your application has been granted).
Will I get a certificate to show that I am a recognised sole practitioner?
No, we will not issue separate certificates. The authorisation is part of the practising certificate, so details of it will be added to your practising certificate when you are granted approval (if approval is granted during a practising-certificate year we will ask you to send us your existing PC for this purpose).
Will my approval as a recognised sole practitioner continue indefinitely?
No. All sole practitioners will need to apply for annual renewal of approval each October at the same time as recognised bodies apply for renewal of their recognition. The forms for renewal of your approval and for renewal of your practising certificate will be sent to you together.
Will it cause a problem if I have a salaried partner?
If you want to have a salaried partner, or to hold anyone out as a partner of the firm, you cannot be a recognised sole practitioner. If you wish to have such partners, you should apply for recognition of your firm as a partnership on form RB1.
In-house, overseas and employees
I'm an in-house lawyer—will anything change for me?
The Legal Services Act amends the statutory powers of existing regulators so that they can develop firm-based regulation. Firm-based regulation is unlikely to affect in-house lawyers who provide legal services mainly to their employer. It may affect in-house lawyers who currently provide services to the public under rule 13 of the Solicitors' Code of Conduct 2007, but not until the advent of the licensing regime for ABSs, when they may need to seek a licence and be regulated as an ABS.
I am a non-practising solicitor working for a licensed conveyancer—am I affected by the changes?
Yes. From 31 March 2009, solicitors employed in firms regulated by the Council of Licensed Conveyancers (CLC) must do so in their professional capacity and will, therefore, need practising certificates. However, you are now able to become a manager of the firm (subject to the rules of the CLC permitting it).
The same applies to a solicitor working for any other authorised non-SRA firm (such as a firm of patent agents or trade mark agents).
Can a claims management company employ me as a solicitor to do the initial litigation work in claimants' cases?
No. Claims management companies are not authorised non-SRA firms. So, if you work for such a company, it remains the case that you can only provide legal services to the company itself—or, under the limited exception, applying to in-house solicitors in rule 13. This is likely to change with the ABSs, so look out for consultations on changes to the Code.
My firm practises only overseas, and has no office in England and Wales—how does the Legal Services Act affect me?
You are affected only indirectly at present. Firm-based regulation does not currently extend to wholly overseas firms. However, the rule changes introduced for LDPs have meant some changes to rules affecting overseas practice—for instance, which overseas firms have to produce an accountant's report (see rule 15 of the Code of Conduct).
Whether you will be able to practise through an ABS in future will depend on a number of factors, including legal and regulatory restrictions on other jurisdictions.
We are a partnership with offices in Paris and London—are we affected?
Yes. Because you have a head office in England or Wales, the firm needs to be a recognised body and you should have been passported in March 2009—this would be the case whether your head office is in London or Paris.
Do the changes affect employees of firms?
The Legal Services Act specifically extends our rule-making powers to all employees and managers of firms, and the amended Code of Conduct reflects this. Firms already need to ensure that employees comply with our rules—the changes mean that we can take direct regulatory action against an employee, as well as the firm, if appropriate. (See our guidance New duties for employees and firms.)
LDPs: Practical issues
What other lawyers can join an LDP?
Licensed conveyancers, barristers, notaries public, legal executives (Fellows), patent and trade mark agents, and law costs draftsmen are able to be managers of LDPs, along with solicitors, registered European lawyers and registered foreign lawyers.
I am a barrister, but my status is non-practising because I did not complete pupillage, and I want to become a partner in an LDP—is this a problem?
Yes and no. If you have not completed your pupillage, you are not entitled to a practising certificate from the Bar Standards Board, so you cannot become a "manager" of the LDP as a practising barrister. Assuming you have no other qualification as a lawyer, you can still become a "manager" in the LDP, but only if the firm makes an application for approval through the "non-lawyer" route. If you are approved by the SRA to become a "manager" through this route, you will count as one of the maximum of 25 per cent non-lawyer "managers" of the LDP.
Can anyone be a non-lawyer manager of an LDP?
Any individual who is not legally qualified can be a manager in an LDP, provided they are approved by the SRA (this will include a Criminal Records Bureau check), and provided there is not more than 25 per cent non-lawyer ownership of the firm. The SRA can only approve individuals to be non-lawyer managers.
Can a non-lawyer practice manager be a partner now?
Yes. Form NL1 and guidance notes, to apply for approval of a non-lawyer manager, are available.
How many non-lawyer managers can a firm have now?
The restriction on the extent of non-lawyer ownership of an LDP is by proportion rather than number—non-lawyers must not make up more than 25 per cent of the ownership of the firm. However, there is an additional restriction in relation to the number of managers—non-lawyers must not make up more than 25 per cent of the number of managers.
Will there be compulsory training on our rules for non-lawyers?
Non-lawyers are not required to undertake specific training—we expect that firms will be keen to ensure that anyone taken into the firm is properly trained (and qualified, if appropriate) for the role they will fulfil.
How much does it cost to get approval for a non-lawyer manager?
The fee to apply to the SRA for approval for a non-lawyer manager is £250. You also need to pay for the Criminal Records Bureau check. Generally, approval will not need to be renewed, although an approval could be withdrawn by the SRA, and will lapse if a non-lawyer ceases for two years to be a manager in a recognised body.
Can someone who does not work in the firm be a manager?
As is the case now, a partner may be more or less active in the firm, but remains professionally and, in most cases, legally responsible. However, the Legal Services Act requires that any non-lawyer owners of practices will have to be managers. This means that a non-lawyer could only be a shareowner in a company if he is also a director of the company.
I'm a sole practitioner. My son, who is not qualified, works for the firm. Can he be a partner?
Subject to approval by the SRA, any non-lawyer can be a partner or manager of an LDP (provided the firm also gains recognition as a recognised body). However, non-lawyers can't represent more than 25 per cent of the ownership of the firm, or more than 25 per cent of the number of managers. Therefore, you and your son could not be the only partners in the firm until a system for ABSs has been developed.
Can my wife's secretarial services company be a partner in our firm?
No. Although firms can have non-lawyer managers, only individual non-lawyers who have been approved by the SRA will qualify. When ABSs are launched, non-lawyer corporate bodies will be able to become managers of a firm, but this will be under a new regulatory scheme to be established by the Legal Services Board.
I'm a barrister considering working within an LDP. Where can I get more information?
The Bar Standards Board has published a series of FAQs on the Legal Services Act.
Who can regulate me?
Can I just move my practice into regulation by the Council for Licensed Conveyancers instead of the SRA?
You can choose the Council for Licensed Conveyancers (CLC) as your regulator—provided you can comply with the CLC's rules (for example, you may need to have at least one licensed conveyancer as a manager in your firm), and provided your firm's practice is confined to work that can be regulated by the CLC.
Currently, the CLC regulates conveyancing and probate services, so your firm would not be able to provide other legal services to clients. There may also be indemnity insurance implications, as the change would probably trigger run-off cover.
Would I still be regulated by the SRA if I joined a firm of licensed conveyancers?
Subject to the Council for Licensed Conveyancers rules permitting this, you can join a firm of licensed conveyancers as a manager or as an employee. Your work through that firm will be regulated by the CLC. However, you will still require a practising certificate, and you will remain subject to rule 1 (core duties) of the Solicitors' Code of Conduct.
Can we sell our firm to Tesco?
This will not be possible until ABSs are launched in line with standards set by the Legal Services Board, which is unlikely to be before the latter half of 2011. Firms are warned against making arrangements that could breach the rules by jumping the gun (see our guidance Preparing for alternative business structures).
Can a private equity company buy into the firm or take an option to buy it later?
The private equity company can't buy into the firm until ABSs are permitted. LDPs cannot include non-lawyer corporate membership. As to an option to buy, firms are warned to take great care. It could well give rise to problems under the rules. The ownership and control of firms that can be regulated by the SRA are constrained by the law and regulations. Additionally, a fee-sharing arrangement cannot go beyond what is permitted under rule 8.02. For example, an option to buy at less than a commercial rate could suggest a transfer of ownership at the earlier date.
If your regulation now applies to everyone in the firm, are we be required to give you details of all our staff?
No. We only request details of managers of the firm and of employees who are solicitors, registered European lawyers and registered foreign lawyers. We will continue to ask for equality and diversity information to help us build a picture of the profession and to monitor progress.
Is it true that the SRA will be demanding large amounts of information every year?
We will try to keep our requests for information to the minimum necessary to enable us to be an effective, risk-aware regulator. We will need to collect more information than we do at present. For instance, turnover figures, such as firms already provide to their insurers, will help us to
- assess risk,
- target our resources, and
- develop a more appropriate system for allocating and collecting fees.
New rules
Have there been many changes to the rules/code?
There have been significant changes to the rules and regulations, including the following:
- The SRA can regulate LDPs—these are (broadly) legal practices owned and managed by at least one solicitor or registered European lawyer, along with certain other lawyers, and up to 25 per cent of individuals who are non-lawyers.
- Unincorporated partnerships need to become recognised bodies.
- Sole practitioners need to be authorised as recognised sole practitioners.
- Existing sole practices and partnerships have been automatically passported to become recognised without having to undergo any formalities.
- Solicitors can join legal practices regulated by other approved regulators (e.g. the Council for Licensed Conveyancers) as owners, managers or employees.
Are the new rules in force?
Yes.
Is it true that there are new requirements for notepaper and websites even if firms are not changing?
Yes. There were changes to the requirements in the publicity rule from 31 March 2009. There were periods of grace for firms to make any necessary modifications and to use up existing stocks of letterhead, but these have now passed. Briefly, the requirements are that all firms must show on their letterhead (and fax heading), website and emails
- the words "regulated by the Solicitors Regulation Authority", and
- the name under which the firm is recognised by the SRA and its SRA number if it is a partnership or sole practice (we will give details of these to existing firms in the passporting letters) or the registered name and number of the firm if it is a company or LLP.
Recognised bodies needed to have made any necessary changes by 1 October 2009 and sole practitioners by 1 January 2010.
How do I have to show the new information on our partnership notepaper?
We don't stipulate how you should show the information that needs to go on your notepaper, e-mails and website. Information given must not be misleading or inaccurate; so, for example, if you use a trading name you must also show the firm's recognised name (or registered name if you were a company or LLP) and you should take care that readers are clear what this is.
Partnerships and sole practices can display their SRA number as best suits their notepaper, for example:
- Solicitors Regulation Authority number 12345
- SRA no. 12345
- Regulated by the Solicitors Regulation Authority, no. 12345.
How do I find my firm's SRA number?
Existing firms received details of their SRA ID number in the reference of their passporting letter—or you can find it by visiting Find a solicitor, the Law Society's directory of solicitors, where it will be shown as your head office ID number.
Keeping up to date
How can I stay up to date with all of these changes?
We are focusing our resources on the changes we need to make to implement the Legal Services Act. The picture is developing all the time, so please add sra.org.uk/LSA to your favourites and check back regularly.
Our e-newsletter, SRA Update, also includes news about our plans and progress. We send SRA Update, on an "as-required" basis, to all regulated individuals who have not previously unsubscribed. You also have the option of subscribing to SRA consultation alerts.