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Canada takes first step towards ABSs

Ontario could be one of the first states to allow alternative business structures

3 March 2014

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By Manju Manglani, Editor (@ManjuManglani)

The Law Society of Upper Canada has taken its first step to introducing alternative business structures (ABSs) in the province, a move that would make it one of the first regulators in the region to allow ABSs.

Australia and Britain are the only two large jurisdictions to allow ABSs, while the District of Columbia allows non-lawyers to own minority shares in law firms. Bills paving the way for ABS have been introduced in North Carolina and Singapore.

In support of the change, which is being put out for consultation to Ontario lawyers and stakeholders, society treasurer Thomas G. Conway said ABSs may be able to "provide more options and choices for consumers, thereby improving access to justice".

"These alternative structures may also lead to more innovation for the profession," Conway said. "Investments in information technology, for example, could create more convenient public access to legal services - and at the same time help lawyers and paralegals develop efficiencies that would enable them to provide services at a lower cost."

The society set up its ABS working group in 2012 to explore the options available for the delivery of legal services, including structuring, financing and the related regulatory processes, and to recommend models suitable for Canada and Ontario.

The group has developed four possible models for consideration across a matrix covering ownership and type of services.

Under the four sets of options, ABSs would be allowed to offer legal services only, with non-lawyers owning up to 49 per cent (option 1) or no restrictions on ownership by non-lawyers (option 2).

A second set of options would allow ABSs to offer both legal and non-legal services, except those identified as posing a regulatory risk, where non-lawyers could own up to 49 per cent (option 3) or with unlimited ownership by non-lawyers (option 4).

The society also approved the working group's recommendation to develop a framework for the regulation of law firms, paralegal firms and other business entities that provide legal services.

Further recommendations requiring law firms to have a complaints procedure were also approved.

In an approach reminiscent of the UK's outcomes-focused regulation, the group will consider amendments to fee-sharing, referral fees, direct supervision and ownership restrictions at a later meeting to ensure they are proportionate to the risks they are designed to reduce.




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