Does your firm need to be authorised as an ABS?

Does your firm need to be authorised as an ABS?

Updated 20 November 2013

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 investors 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, and
  • notarial activities. (The SRA is not a licensing authority for notarial activities.)

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

  • (a)

    an authorised person (individual lawyers and firms authorised by an approved regulator to provide reserved legal activities),

  • (b)

    a registered foreign lawyer,

  • (c)

    a member of an Establishment Directive profession entitled to pursue professional activities in an Establishment Directive state,

  • (d)

    a firm providing lawyers' services in which all managers and interest holders are individuals within (a) to (c) or are bodies in which more than 90 per cent of managers and interest holders are within (a) to (c).

 

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 non-lawyer involvement is in another body which is itself a manager or interest holder of the firm. Due to the application of the Legal Services Act 2007, this means the firm with the direct non-lawyer involvement will need to be an ABS and must meet the eligibility criteria to be an ABS.

A recognised body authorised under section 9 and 9A of the Administration of Justice Act 1985 prior to 6 October 2011 is entitled (until the end of the transitional period) to remain a recognised body even though it has or acquires no more that 25 per cent non lawyer ownership or management , provided it remains within the constraints of sections 9 and 9A of the Administration of Justice Act 1985.

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 the Lord Chancellor ends the grace period. 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.

Flowchart for finding out whether you need to be licensed as an ABS

Do you intend to carry out reserved legal activities?
Yes (go to 1) or No (go to A)?

1. Do you have any non-lawyer involvement?
Yes (go to 2) or No (go to B)?

2. Do you have any non-lawyers involved directly as managers or interest holders?
Yes (go to C) or No (go to 3)?

3. Do any of your corporate managers or interest holders have non-lawyers who together are entitled to exercise, or control the exercise of, at least 10 per cent of the voting rights in that corporate manager or interest holder?
Yes-greater than 10% (go to C) or No-less than 10% (go to A)

A. You do not need to be authorised as an ABS (you may need to apply for authorisation a recognised body)

B. You cannot be authorised as an ABS but you need to consider whether you are permitted under the LSA to carry out the activities you wish to provide.

C. You need to be licensed as an ABS.