COMPLIANT BUSINESS DEVELOPMENT

Law firms face huge competition as a result of Legal Services Act 2007 (LSA) which will allow for alternative business structures (ABSs) in only a few years. The SRA’s website states that as well as “protecting and promoting the public interest” it must also promote “competition in the provision of services” and encourage “an independent, strong, diverse and effective legal profession”.

ABSs are currently not permitted and firms must avoid inadvertently entering into an ABS by the back door as this will amount to a disciplinary offence.  However, there are certain avenues for flexibility and innovation including:

• Legal Disciplinary Practices
• Fee sharing arrangements under Rule 8
• Referrals of business under Rule 9
• Separate business arrangements under Rule 21
  

Each of these allows firms to explore relationships with third parties, and thus begin to align their businesses with the future environment intended by the LSA.

These rules and associated guidance notes are complex and can be subject to different interpretations.  They are also subject to change, for instance the change to the meaning of independence within Core duty 1.03 in March 2009 and changes to Rule 9 guidance notes in November 2009, the effect of which mean that some previously compliant firms may no longer be compliant, particularly in personal injury litigation.

Firms whose third party relationships do not comply with the rules risk a breach of the relevant rule and breaches of Core duties under Rule 1. Even if the breach is technical in nature firms risk SRA Regulatory and Disciplinary Investigations . In addition, the SRA has the power to impose conditions on a firm’s recognised status which would “limit, halt or prevent a risk to clients, third parties or the public arising from a business agreement or association” with all of the associated operational and financial consequences that this could bring about.

TCP is well placed to advise firms on whether their current arrangements are compliant. It is also able to help firms to structure their future commercial business relationships and schemes to minimise the risk of falling foul of complex provisions and to help firms keep up to date on recent or imminent changes. 

The service can be offered as a free-standing compliance project or as part of TCP‘s Compliance Audit Service .

Please contact TCP to make further enquiries about Compliant Business Development.