News / General

ALTERNATIVE BUSINSS STRUCTURES - AN ABBREVIATED VERSION

By SLAS Spokesperson

The following has been summarised but, as far as possible, without altering the text, from a consultation paper published by the Scottish government titled “Wider Choice and Better Protection:  A Consultation Paper on the Regulation of Legal Services in Scotland” in respect of which responses are invited by the Scottish Government by Friday 3rd April 2008.  Please note that the full text of this paper can be found on the web at www.scotland.gov.uk/publications/12/29155017/30  .

 

CHAPTER 1:  THE ROAD TO REFORM

 

The objective of our proposed legislation in the legal services market is to achieve improved access for all to high quality legal services, within a competitive market, which is appropriately regulated to ensure public protection and maintain quality.

 

Which? lodged a “super-complaint”.   Which? asserted that the current regulation of Scottish legal firms restricted choice to consumers and prevented the formation of Alternative Business Structures (ABS).  Which? favoured the creation of ABS to provide choice and innovation to consumers and the creation of a Scottish Legal Services Board for the regulatory control of the Scottish legal profession and consumer protection.

 

The Office of Fair Trading (OFT) recommended that the government publish a statement to set out how it intended to reform the current system

 

The Cabinet Secretary for Justice set out the government’s view that the status quo was not an option and the Scottish parliament unanimously endorsed a motion: “the regulatory and business structures of the Scottish legal profession should reflect Scottish circumstances and support improved access to high quality legal services in a competitive and appropriately regulated market (and) also widen choice, provide easier access to legal services and create the conditions for more affordable services so that social justice will be at the heart of future changes”.

 

The Law Society of Scotland stated the key issues were to establish an appropriate regulatory framework and to maintain the core values of the legal profession.  The Society’s AGM approved the policy on 22nd May 2008.

 

The Faculty of Advocates favoured maintaining an independent referral bar subject to the cab rank rule.  Although the Faculty does not wish its members to participate in ABS it has no objection to solicitors being able to do so, and argues that it should be open to any advocate wishing to join an ABS to do so by becoming a solicitor advocate.

 

The introduction of ABS in England and Wales is planned for 2010/2011.

 

The Legal Profession Bill was announced as part of the Scottish government’s legislative programme on 3rd September 2008.

 

 

 



CHAPTER 2:  ALTERNATIVE BUSINESS STRUCTURES

 

The Law Society of Scotland has statutory responsibility for regulation of solicitors, those holding rights of audience and licenced conveyancers and executry practitioners (“legal professionals”).

 

The Law Society of Scotland’s position is that it is not a particular business structure which should guarantee the protection of professional values, but the regulatory framework within which legal business operate.

 

(But we do not yet know the size, number or complexity of the bodies that might come to own legal practices.  How, for example, could the Law Society ascertain the fitness to own a law practice of share holders in a large company?  What about owners who live outwith the Scottish jurisdiction or, having passed the test of fitness within the Scottish jurisdiction, later move out of the Scottish jurisdiction?)

 

In reforming the regulatory framework, we need to recognise not only that the private legal profession is offering commercial services in a competitive market place but also that an independent legal profession is vital to underpin the rule of law, and that the public must be able to place trust in the competence and integrity of anyone operating as a legal professional. (But is the commercial market place in which players can succeed or fail, grow or shrink, thrive or disappear, appropriate for an essential service ?  Would it be appropriate for GP medical services, for example, for which special legislation is now being drafted to exclude the involvement of external commercial interests ?)

 

We set out our proposals for the regulatory framework in the following chapters.  This framework would make it possible for any of the following types of ABS to operate in Scotland.

 

AN ABS INVOLVING NON-LAWYER OWNERSHIP

This would allow non lawyers, who participate in a practice without offering a direct service to clients (for example as a chief executive) to hold an equity stake in the practice. 

 

AN ABS INVOLVING EXTERNAL OWNERSHIP

This would allow shareholding by people other than a director of the practice, including investors holding sufficient shares to give them an influencing or controlling interest in the practice.

 

MULTI DISCIPLINARY PRACTICES (MDPS)

This would allow solicitors and other professionals to come together in business to provide legal and other services to third parties.

 



CHAPTER 3:  WHO WILL BE AFFECTED BY THE BILL

 

The only areas reserved exclusively to solicitors are conveyancing, applying for confirmation in executries and preparing writs relating to court proceedings.

 

We propose that the Bill will provide for the following

 

  • The professions of solicitors and advocates, in their traditional forms of practice, will continue to be regulated by the Law Society and Faculty of Advocates respectively.

 

  • The reserved areas of practice will remain as now, although could in future be changed by subordinate legislation.

 

  • The regulation of ABS will apply to any other form of business where a legal professional is involved in the provision to third parties of legal services, namely legal advice, assistance or representation in connection with the application of the law or the resolution of legal disputes. (But legal services are acknowledged elsewhere in the paper to be incapable of definition as such and the Bill has to be much more specific.)

 

  • A business which does not involve legal professionals will not be regulated even if it provides legal services within this broad definition.  It will not be permitted to provide services in reserved areas.

 

(the foregoing suggests that persons providing services such as Will writing, employment advice, personal injury advice etc who are not solicitors shall not be restricted by regulations whereas solicitors providing these services, even exclusively, shall have to bear the burden of regulation)

 

We are considering whether the Bill should include a provision that would allow a professional or other body to apply for executry rights.  This would allow approved non-solicitor members of that body to exercise confirmation rights.

NB. A FULLER ABBREVIATED VERSION OF THE GOVERNMENT PAPER SHALL BE INCLUDED IN THE SOCIETY'S MARCH GAZETTE

 



Comments

Leave a Comment

There are currently no comments for this article.



Subscribe Now!

And get your membership to a society dedicated to promoting your interests.

Advertisements

LawCare - Health Support & Advice Solicitor’s Helpline Telephone 0800 279 6869 - Click for further details
SLAS General Data Protection Regulations
PCC / TCPD Courses - We offer a range of courses to fit your Trainee Solicitors requirements - Click for more info
Legal Defence Union - Promoting and protecting the welfare of solicitors in Scotland