Cabinet at Essex gives green light to alternative business structure
The Cabinet at Essex County Council has backed plans for Essex Legal Services (ELS) to set up an alternative business structure.
A report prepared ahead of the Cabinet meeting on 20 October said: “An ABS has been identified as a mechanism for ELS to achieve growth through increasing its client base.
“As a separate legal entity the ABS will be able to work for organisations other than local authorities and public sector bodies. Additional income can be generated through access to a wider client base, which will also increase the resilience of the in-house service.”
The report added that initial forecasting had identified additional surplus of £165,000, £963,000 and £1.8m from 2017/18 through to 2019/20 respectively, “which would be achieved through adopting a growth strategy with the creation of an ABS listed as one of the key enablers”.
Under the proposals Philip Thomson, Director for Essex Legal Services, and Alex Hallam, Assistant Director, will be appointed as the sole directors of the vehicle, ELS Ltd (a dormant company set up by the council in December 2009). Neither Thomson nor Hallam will receive a remuneration package as part of their appointment.
Hallam is expected to become the Compliance Officer for Legal Practice for the ABS, with Debbie Paget set to be the Compliance Officer for Finance and Administration. Paget is currently ELS’ Head of Practice Management.
The report said ELS had been looking to establish an ABS since March 2015 “to enable it to pursue business currently not permitted under either the constraints of local authority trading or the regulatory requirements of the SRA”.
It added that:
- ELS would continue to pursue as much as possible trading as Essex County Council within the current structure and rules. “ELS Ltd will only trade in circumstances where ECC cannot undertake the work directly.”
- It is proposed that all legal work currently undertaken for the county council and work undertaken as part of existing trading activities would remain with the in-house team and will not be undertaken by via ELS Ltd. “This [is] because any net profits generated by ELS Ltd are subject to corporation tax at 20%, therefore to place all trading activity within the ABS would not make commercial sense.”
- In the first instance the work that will be sought for ELS Ltd/the ABS will be from former clients of the service who have entered the private sector as a result of changes in their ownership. This is expected to be relatively small in comparison to that carried out by Essex Legal Services. “There will be an initial bedding in period, whilst work opportunities are explored.”
- The county council as sole shareholder will retain appropriate oversight and control over ELS Ltd./the ABS, “ensuring that due process is followed at all times”.
- A business plan is being prepared setting out the governance arrangements, finance, marketing and regulatory matters.
- It is not proposed that ELS Ltd./the ABS would directly employ any staff. “Instead, ECC will make available professional and support staff to enable ELS Limited to perform the legal work it has been given. In return ELS Ltd will pay ECC an agreed fee reflecting both the salary costs of the individual and overheads such as IT, accommodation, pension etc. This fee will be based upon an hourly rate which covers the total cost involved. The chargeable rate will be determined by ELS in accordance with the processes currently in place for charges and work undertaken as part of their traded service.”
- If it is necessary for the directors to be employees of the ABS, then this will be achieved by director’s service agreements. “The impact on the individuals will be minimal because their primary employment rights will remain undisturbed and they will continue to be employed by ECC”.
A copy of the report can be viewed here. The application to the Solicitors Regulation Authority is expected to cost £2,450.
Commenting on the Cabinet’s decision, Philip Thomson said: “We are delighted that the Cabinet at Essex County Council has given approval for ELS to apply to the SRA for an ABS. Preparation of the application is already at an advanced stage and we anticipate the application will be submitted for determination by the SRA shortly.
“The need for the ABS relates to the provision of legal services by ELS to various public sector organisations who are transforming the way they deliver services, including in ways that ELS would be unable to support but for creation of the ABS. This is an exciting opportunity for ELS to develop as a truly public sector legal service of the future.”
A handful of local authorities have set up ABSs so far. In November 2014 Buckinghamshire County Council joined with the Buckinghamshire & Milton Keynes Fire Authority to set up Buckinghamshire Law Plus. HB Public Law – the shared service hosted by Harrow Council – also established an ABS that month.
Cambridgeshire and Northamptonshire County Councils meanwhile launched LGSS Law Ltd after securing an ABS licences from the SRA in April this year.
