The conversion of yet another set of traditional firms confirms the emerging trend that the much-maligned ABS structure could be a life line for smaller practices
The ABS storyboard started unwinding in another direction yesterday. One which should make traditional law firms look up and feel that the whole Legal Service Act upheaval could, in fact, work out to their advantage.
The latest round of ABSs authorised by the SRA suggests that it’s no longer just about Tesco law, private equity buying up law firms or, more recently, the Co-op preparing to run high street firms out of business. It suggests that something else is happening.
It wasn’t the main plot in the original scenario but traditional law firms have begun rewriting the script and appropriating the ABS proposition to further their own agenda.
The trend beginning to emerge is that, far from being left behind by the pace of reforms, firms are looking at the new corporate structure as an opportunity to do what many say they have wanted to do for some time.
It started with the first two small practices to be authorised as part of the first round, John Welch & Stammers and Lawbridge. All these firms wanted was to allow non-lawyers playing key parts in the business into the partnership. Until now they couldn’t if they weren’t at least a four-partner firm. ABS could be a life line for these firms as they can start thinking afresh about succession planning. It seems so obvious that, in retrospect, you have to wonder why it took a whole new radical piece of legislation to bring this change about.
A few have joined the ranks since. The conversion yesterday of a few more brings home to the remaining thousands that the ABS option could be relevant to them too. Especially when you consider that one of the new licensed organisations is top 200 firm Winckworth Sherwood. Of course as an LDP the firm had little choice but to go the ABS way. But as the largest English firm to convert to date – if you exclude the special case of Russell Jones Walker being acquired by Slater & Gordon – it’s a significant chapter in the ABS story.
Sure, this doesn’t mean that how these firms deliver legal services has changed – yet – and none of the newly converted have any immediate intention of raising external capital. But this may come, because as the Co-op and other business savvy entrants start spreading their tentacles deeper into the high street, how smaller firms can leverage the ABS philosophy beyond mere corporate convenience will be a major survival test.
However, what this already indicates is that law firms are not as set in their fusty ways as they are usually portrayed. There are still too many whose phones ring dead over lunch or after five but it is surprising – and encouraging – to see how many appear to be more responsive to clients’ expectations, from opening late or on Saturdays, to including online information for prospective clients.
The only obstacle in the way, it seems, isn’t the willingness to run firms as businesses but whether the processes underpinning the new regulatory framework provide the necessary support.
Because the message coming back from those who’ve been through the ABS conversion process is that it has been incredibly bureaucratic. LDPs were expected to be passported into ABS status but if the experience of Tom Vesey, partnership secretary at Winckworth Sherwood, is anything to go by, the process is not as straightforward.
Paul Mulderrig, of Mulderrigs, a small personal injury firm which was one of the first to become a limited company, had similar frustrations.
SRA staff have been praised for their support, but with little guidance about how applicants are expected to demonstrate ‘fitness to own’, firms said they were left fumbling in the dark, putting forward what they believed was acceptable evidence, until, eventually, being given the green light.
With 516 LDPs waiting in the wings and no doubt a growing number of smaller firms likely to become interested, the ABS process will have to get a lot smoother if the SRA wants to avoid the sort of complaints that have beset the MySRA system.