Alternative business structures (ABSs) were once a proposed reform of legal services. The Legal Services Board’s November 2009 consultation asked how licensing authorities should authorise firms that could be owned or managed by people who were not lawyers. That consultation is long closed: ABS licensing began on 6 October 2011.
This article preserves the historical context of the original consultation and explains how to read it today. The 2009 paper was discussing a future licensing system. It should not be treated as a statement of the current application process or current regulatory requirements.
What was the 2009 consultation about?
The Legal Services Act 2007 created the framework for alternative business structures in England and Wales. The policy change allowed non-lawyers to invest in, own or manage legal practices, subject to authorisation by a regulator with the power to license these businesses.
In November 2009, the Legal Services Board published Alternative business structures: approaches to licensing. Its purpose was to seek views on how licensing authorities might regulate the new business models. The paper discussed issues including management and ownership suitability, governance, professional indemnity insurance, compensation arrangements, reserved and unreserved legal activities, and access to justice.
At the time, these were matters under consultation. The paper invited responses before its February 2010 deadline. That invitation is no longer open, and the discussion should be understood as part of the development of the ABS licensing framework.
When did ABS licensing begin?
ABS licensing commenced on 6 October 2011. Since then, eligible legal services businesses have been able to apply to an authorised licensing authority to provide reserved legal activities through a structure that includes non-lawyer ownership or management.
An ABS is not a separate kind of legal service. It is a business structure and authorisation model. The firm still needs to be authorised for the reserved legal activities it provides, and it remains subject to the rules of its regulator.
The Legal Services Board’s ABS information records the introduction of the licensing system. Its current list of approved regulators and licensing authorities identifies which bodies regulate particular reserved activities and which can license ABSs.
What counts as an ABS today?
The exact test depends on the legal structure and the regulator. In broad terms, a business may need an ABS licence if a non-authorised person is a manager or has an ownership interest in the entity providing regulated legal services. Indirect ownership and control can also matter.
For firms regulated by the Solicitors Regulation Authority, an ABS is also described as a “licensed body”. The SRA’s firm authorisation guidance explains when authorisation is required and how the licensable-body test works. Firms should check the full test against their proposed structure rather than relying on a general description.
There is no single application route for every legal business. The relevant regulator depends on the reserved activities the firm intends to provide and the regulator with authority to license that type of entity. The Legal Services Board maintains the current list of licensing authorities.
What does this mean for a conveyancing firm?
A conveyancing practice considering outside investment, non-lawyer management or a corporate group structure should assess its regulatory position before making the change. The question is not simply whether the business has a non-lawyer shareholder. The firm needs to identify who will own or control the authorised entity, what activities it will provide and which regulator has jurisdiction.
Before proceeding, a firm should:
- map direct and indirect ownership, voting rights and management arrangements;
- identify the reserved legal activities the business will provide;
- confirm which regulator can authorise the proposed entity and whether an ABS licence is required;
- check the regulator’s current approval process and obtain any required authorisation before providing regulated services through the new structure; and
- review related obligations, including professional indemnity insurance, lender-panel terms, CQS requirements, client money arrangements and contracts with business partners.
A change in ownership or control may also affect who needs approval or notification. For an SRA-regulated licensed body, review the SRA’s guidance on whether an interest in a licensed body requires approval and take advice on the specific transaction where appropriate.
What remains relevant from the 2009 paper?
The consultation remains useful as a record of the questions regulators faced when introducing a new ownership model. Issues such as governance, professional indemnity insurance, compensation, responsibility for legal work and consumer protection are still relevant when assessing a business structure.
But the 2009 paper is not a current compliance checklist. Requirements have developed through legislation, regulator rules and subsequent guidance. Any firm considering an ABS structure should start with the rules and application guidance of the relevant licensing authority, rather than relying on proposals made during the consultation.
Related considerations for conveyancing firms
Alongside regulatory authorisation, consider the firm’s lender-panel arrangements. Our article on managing lender-panel membership risks discusses the importance of keeping panel information accurate and reviewing the firm’s approach to panel management.
When reviewing the proposed business structure, also consider whether changes to clients, services or delivery arrangements should be reflected in the firm’s AML framework. Our guide to AML firm-wide risk assessments for law firms explains how the assessment should reflect the practice’s actual work and risks.
The supervisory landscape is also developing. Read our article on FCA AML supervision and preparing your law firm in 2027 for the latest discussion of engagement and preparation. The planned transfer concerns AML supervision; it should be considered separately from the firm’s ABS licensing and authorisation arrangements.
Further information
- Legal Services Board: approved regulators and licensing authorities
- Legal Services Board: alternative business structures
- Solicitors Regulation Authority: firm authorisation
- Solicitors Regulation Authority: approval of interests in licensed bodies
This article provides general information and is not legal advice. Regulatory requirements depend on the firm’s structure, activities and regulator. Check the current rules and obtain advice on a proposed ownership or control change.
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