Separate businesses ban lifted

The prohibition on solicitors owning or having connections with outside businesses is to be abolished, the Solicitors Regulation Authority (SRA) Board has decided.

The board voted last week to change the separate business rule, which prevents solicitors having links to separate businesses providing non-reserved legal services and therefore outside the remit of regulation. This means law firms will be able to compete on a level playing field with alternative business structures (ABSs) by owning, being owned by, actively participating in or developing links with separate businesses.

The board also voted to reform the rules on what activities law firms can undertake, which will make it easier for them to create one-stop shops for professional services. Instead, the regulator will focus on ensuring outcomes that protect the consumer.

The reforms were consulted on from November to February. They now need to be approved by the Legal Services Board and, if agreed, will become part of the Solicitors Handbook on 1 November.

David Greene, partner at Edwin Coe, says: “The policy lying behind the Separate Business Rule is to forestall confusion on the part of the consumer as to what part of a solicitor’s service is regulated.  

“We presume that another method will be prescribed to resolve that issue. For solicitors, the removal of the Separate Business restriction is undoubtedly good news. We have faced fierce competition for legal advice that falls outside reserved activities, such as will writing.  

“The removal of the restriction will go some way to redress the position; allowing solicitors to establish businesses offering ‘legal services’ that benefit from the branding of solicitor but fall outside the regulated environment.”      

Paul Philip, SRA chief executive, says: “We are levelling the playing field for all types of law firms, encouraging innovation and growth, while ensuring appropriate consumer protection. 

“This follows on from changes we made last year to open up the market to different business models and ‘one-stop shop’ services. We are now looking into what more we should do to give solicitors even more flexibility in future.”