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Alternative Business Structures (ABS)

By Michael Sheridan

The link to the Independent Review of Legal Services in Scotland is shown below this paragraph however, in the short time available (only until 31 March 2018) it is probably not practicable to address the whole of the review enquiry. The crucial issue is Alternative Business Structures (ABS) and you should write direct to the Independent Review into Scottish Legal Services, GW 10, St Andrew's House, Regent Road, Edinburgh EH1 3DG with your own views as to whether or not Scottish legal firms should be made saleable on the commercial market.

Since time immemorial the solicitors’ profession in Scotland has been vigourously independent and that independence was maintained as a matter of course by the regulatory body, the Law Society of Scotland, from its creation in 1949 that independence was protected by various rules including the prohibition of the sharing of fees with non--solicitors and even the prohibition of sharing front doors with non--solicitors.

It was therefore only to be expected that, when the Clementi proposals were first mooted in England and Wales in 2004, that these would be rejected out of hand in Scotland, as they were, under the leadership of the Law Society of Scotland. However, unbeknown to the profession at large and the general public in Scotland, other circumstances where in play. Around 2008, a number of the larger firms in Scotland were confronted with balance sheet problems which threatened the recovery by many of the equity partners of their capital. Realisation dawned that, by turning the law firms into saleable commodities via ABS, these partners would receive their capital and the law firms themselves could spend the rest of their existences servicing the investors.

Then, in 2008, the Law Society of Scotland changed its policy and came out in favour of ABS in Scotland. This was so unexpected that much of the legal profession was caught sleeping on the job and the principle of ABS was accepted at the Law Society AGM in 2008. Thereafter, when this development dawned on the profession, fierce opposition against ABS arose around Scotland. An EGM was convened at the Law Society at which several thousand votes against ABS were raised. However, the then President of the Law Society solved the problem of democracy by dint of refusing to take a vote, despite having convened the EGM at the request of the membership, in terms of the constitution.

Eventually, a form of ABS was passed in 2010 by the Scottish parliament but, in such terms that it was impossible to frame coherent regulations to bring the legislation into effect. Now,  the Scottish government has convened a consultation directed at a very limited range of correspondents and in terms clearly predicated upon an outcome in favour of ABS in Scotland. Sadly, any future authorisation of ABS in Scotland shall be too late to save the lage Scottish firms referred to above most of which have now been taken over by non-Scottish firms.. It is not clear what is now the rationale for ABS in Scotland. It was interesting to note, however, that the President of the Law Society of Scotland in June 2015 when the Law Society was promoting ABS was, himself, the proprietor of a law firm which was in serious financial difficulty and has now gone into administration.

The Scottish Law Agents Society has opposed ABS consistently since it awoketo the change in Law Society policy which took place in 2008 and continues that opposition to this day. The Scottish Law Agents Society, unsurprisingly, has not been asked for a view in the current consultation. It Is unclear whether any enquiry has been made around England and Wales as to the Consequences of ABS which was authorised in England and Wales in Terms of the Legal Services Act 2007.

At the last minute, however, a sort of last chance saloon has opened and the Independent Review has issued a general invitation to the public to submit evidence to the review. The Scottish Law Agents Society recommends that the public accepts that invitation and explains to the Independent Review that ABS is a huge mistake which threatens the integrity of the Scottish legal system as a vital element in the identity of the Scottish nation.


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