A warning that small and medium-sized firms will be “disadvantaged disproportionately” by the new legal disciplinary practice (LDP) provisions of the Legal Services Act has been made by the Legal Services Policy Institute in its response to the Solicitors Regulation Authority’s (SRA) Consultation Paper on new forms of practice and regulation.
Professor Stephen Mayson, Director of the Institute, part of the College of Law, says: “The Legal Disciplinary Practice requirement for a minimum of 75% lawyer ownership and control disproportionately disadvantages small and medium-sized firms currently with three or fewer partners who wish to take non-lawyers into co-ownership.”
Even where firms are able to take advantage of the new LDP provisions, they will face a further significant disincentive with the costs, time and effort required to convert from an LDP to an alternative business structure (ABS) when the licensing provisions become fully operational in about four years’ time.
Stephen Mayson says: “We are urging the SRA to give an early indication of their likely approach to the conversion of LDPs into ABSs. Also, it does not seem to be clear what would happen to an LDP owned by, say, three lawyers and a non-lawyer where one or more of the three lawyers ceases to be an owner. Such a situation could arise beyond the control of the firm, for example, because of the death of one of the lawyers.”
More generally, the Institute wishes to emphasise the importance of education and training for ownership, investment and management roles in the new structures, including appropriate training for non-lawyers. It believes that the SRA should consider using its new power to require the appointment of a compliance manager in LDPs who would oversee all aspects of supervising the firm’s conformity with the LDP regulations.
The Institute also expressed its regret that it will take until 2009 to authorise LDPs. Its response says: “It is three years since Sir David Clementi’s final report. It is therefore disappointing that further anticipatory work was not carried out.”
Professor Mayson says: “The market place for legal services stands on the threshold of momentous changes. Solicitors are potentially disadvantaged by any delay in their ability to begin the process of adapting their businesses and structures to this new environment. Their regulatory body should not be contributing to any possible competitive disadvantage caused by delays in introduction.”