Tesco law is here!

As of today, 6 October 2011, the starting gun for alternative business structures (ABS) has fired. Lawyers are free to set up in business with professionals from other industries, and law firms can legally secure external business investment and ownership. Justice secretary Ken Clarke, recently likened this moment to the financial sector “Big Bang” of 1986.

It has been dubbed “Tesco law” because legal professionals will for the first time be able to work in mixed practices, for example, with accountants, or be based at an entirely different business, such as a supermarket. Couples will therefore be able to fall out over the frozen peas section and file for divorce on their way out.

In reality, law firms will not be able to form ABS until at least the new year. The Solicitors Regulation Authority (SRA) application to license ABS has been delayed, and is now expected at the end of 2011.

The Council for Licensed Conveyancers is the only regulatory authority currently in a position to authorise an ABS licence.

Justice minister Jonathan Djanogly said: “This is a landmark day for the UK legal industry.

“Our legal services are already rated among the best in the world, used by millions of people around the globe as well as in the UK, and these changes will set them up to move to new heights. They will enable firms to set up multi-disciplinary practices and provide opportunities for growth.”

David Greene, senior partner, Edwin Coe and NLJ consultant editor, said: “In terms of our practices, the question on many solicitors’ lips is whether they should be looking at establishing an ABS and attracting outside investment.”

City firms “would probably say that they have sufficient capital to run their businesses and expand,” he said, while mid-tier firms may find that their business model is “often difficult to squeeze into the box that secures investment”.

“The place where external investment looks more likely is in the ever-growing commoditised litigation services. The interest for investors (mainly through claims management companies) has tended towards the personal injury market but recently there has been a growth in commoditised financial services claims.”

Law firm Everyman Legal announced today that it will apply to become an ABS early next year and seek a stock market admission on the Sharemark exchange in the final quarter of 2012.

The firm, which is four years old, combines a national network of “partner” solicitors with the sale of online templates and information. It specialises in providing legal services to entrepreneurs.

It believes it is the first law firm to definitively announce it will seek to form an ABS.

James Hunt, its founder, said: “I recognise that this may seem to some to be a very bold move, but we share the entrepreneurial spirit of our clients and plan to be at the vanguard of the revolution taking place in the legal sector. We’re under no illusions that if you don’t put in place the right long-term plans, you will not create the right structure and environment for rapid, sustainable growth.”