Government consults on removing barriers to market entry for ABSs
The Government has launched a consultation on changes that would remove barriers to market entry, and regulatory burdens on, alternative business structures (ABSs) in legal services.
In a written ministerial statement, the Minister of State for Civil Justice, Lord Faulks QC, said: "Since 2010, when alternative business structures were first licensed to provide legal services, over 600 ABS firms have entered the market. The introduction of ABS businesses, particularly those that have access to external investment and business and commercial expertise, has benefited the market more widely.
“Recent research has indicated that ABS firms are more likely to be innovative than other regulated legal services firms. These new, innovative providers have increased competition in the market, which we believe encourages a wider variety of legal services in the market that are more accessible and affordable to consumers.”
Lord Faulks added: “As a result of concerns raised at the time about the potential risks of these new and unknown business models, the legislative framework for the regulation of ABS businesses, set out in the Legal Services Act 2007, is more onerous and prescriptive than that for traditional law firms.
“In practice, ABS businesses have not been shown to attract any greater regulatory risk than traditional law firms and the Legal Services Board and front-line regulators suggest that the current statutory requirements act as a deterrent and an unnecessary barrier to firms wanting to change their current business model to a more innovative one, as well as to new businesses considering entering the market.
“The proposals set out in this consultation aim to enable legal services regulators to reduce regulatory burdens on ABS, while taking a more effective risk-based approach to regulation."
A copy of the consultation paper can be viewed here.
Lord Faulks also said the Government intended to consider the detail and timing of a further consultation on making legal services regulators independent from professional representative bodies, in the context of the preliminary findings of the Competition and Markets Authority study into the legal services market. These are due to be published shortly.
The consultations follow the publication in November last year of A Better Deal: boosting competition to bring down bills for families and firms which set out the Government’s approach to encouraging open and competitive markets.
The Solicitors Regulation Authority has welcomed the consultation.
Paul Philip, its chief executive, said: “Currently the one-size-fits-all approach to approving ABS is unnecessarily burdensome. It is not appropriate for a two partner law firm who wants to convert to an ABS to go through the same process as a global company entering the legal market. These proposals will allow us to be more targeted and proportionate – better able to encourage innovation and choice, while still making sure the public is protected.
“It is good news that the Government plans to enable us to take a more effective approach, so that we can make it easier for ABSs to enter the market and make legal services more accessible and affordable for the public.”