The Legal Services (Scotland) Act 2010 allows, for the first time, solicitors to set up business with non-solicitors in so called licensed legal service providers (LPs).

A similar arrangement for alternative business structures (ABS) is already in place in England. Scottish LPs would be required to be majority owned (at least 51%) by regulated professionals. The professions which currently qualify as “regulated professions” are set out in the Licensed Legal Services (Specification of Regulated Professions) (Scotland) Regulations 2012.  

We have been approved as a regulator of LPs but await authorisation to act. We are working with the Scottish Government to achieve authorisation.

If you have any questions or comments on this matter, please contact Samantha Hollywood.


In 2004, Sir David Clementi reported to the Westminster Parliament in relation to the legal services market. He recommended that for the benefit of consumers, competition in the legal services market should be opened up, in particular that legal services businesses should be able to be owned by non-solicitors.

This opened the door for external investment and also the potential for creation of multi-disciplinary practices.

The equivalent Scottish legislation (the Legal Services (Scotland) Bill) was introduced to the Scottish Parliament on 30 September 2009.

The Bill passed through its usual stages within the Scottish Parliament and was considered by the Justice Committee. During that process, the Society gave evidence in relation to the contents of the Bill and also submitted a number of amendments.

These amendments were (at least in part) promulgated on the basis of discussions and motions which came before the annual general meeting and special general meetings of the Society, where the topic of alternative business structures was discussed in some detail.

The Bill was passed by the Scottish Parliament on 6 October 2010, with royal assent being received on 9 November 2010.

Since that time, the Society has discussed the position with government on a number of occasions and the government has brought forward the necessary measures to implement the legislation, including the provision of certain regulations.

The structure for regulating alternative business structures in Scotland

The government will approve a maximum of three regulators (approved regulators) who will be responsible for regulation of licensed legal services providers (licensed providers). Within the 2010 Act, an amendment was made to the Solicitors (Scotland) Act 1980 to allow the Society to apply to become an approved regulator - a policy approved by the Council.

The main difference between the Scottish and English legislation arises from the different ownership models which can exist north and south of the border. South of the border, there are no restrictions on ownership of a licensed body (ABS). North of the border, a licensed provider must be owned 51% by solicitors and/or members of other regulated professions. The regulated professions were determined by government after consultation and confirmed in regulations and include various types of accountant, architects, actuaries and surveyors.

The aim of the legislation

The aim of the 2010 Act is to set out the framework for a regulatory scheme for licensed providers, as well as indicating what will be expected of an approved regulator. The regulatory framework requires specifically practice rules, accounts rules and rules in relation to licensing.

In the draft regulatory scheme, the team working on that scheme have, so far as possible and appropriate, aimed to adapt the current practice rules for the solicitor profession into rules for licensed providers - the regulation of licensed providers is based on the services provided and the entity as opposed to solicitor regulation, which is based on individuals. In addition, there are specific rules in relation to licensing to take account of issues such as the fitness of other professionals and/or investors to become involved in the owning of or running of a licensed provider business.


December 2015

The Society’s revised draft of the regulatory scheme was submitted to the Scottish Government on 16 December 2015. This followed further amendments made in light of comments from the Government and other stakeholders.

March 2014

After receiving feedback from the Scottish Government on our initial regulatory scheme for licensed legal service providers, the Society has been working on a revised draft scheme. The further draft scheme has now been submitted to the Scottish Government for discussion.

August 2013

We have had a number of meetings with the Scottish Government over the summer months. The meetings have been helpful and productive but have illustrated that there remains a lot of work to do to produce a regulatory scheme which (1) we regard as workable and effective; (2) successfully navigates around the challenges in the legislation; (3) meets the expectations of the Scottish Government and the requirements of the 2010 Act; and (4) would be regarded by prospective licensed providers as viable, appropriate and proportionate.

The Society continues to work on developing a redrafted regulatory scheme - which is likely to be considerably more detailed and may differ quite significantly from the original draft submitted to the Scottish Government in December 2012. In light of that we have removed the December 2012 material from this page but anyone who wishes more information is welcome to contact us.

The timetable for potential approval remains uncertain - late 2013 or during 2014 remains the Society's most optimistic guess as to when we could, potentially, be authorised to act as an approved regulator but, as much of the process for approval and authorisation is outwith the Society's control, that timetable is subject to change.

April 2013

The Society has been informed by the Scottish Government that the process for considering our application to become an approved regulator of licensed legal services providers (LPs) will take significantly longer than originally envisaged.

Whilst the Society submitted its scheme last December and has been in discussion with the Scottish Government since, there remain outstanding issues where comments from government are awaited. Even once those are received, it will be some time before the model can be finalised and re-submitted.

The timetable previously given by the Scottish Government was that the Society could be an approved regulator by early April 2013. This has proven to be over-optimistic given what is involved. The new timeframe from the government suggests that approval towards the end of 2013 may be more realistic. The government will have to consult with the Lord President, the Office of Fair Trading and others once it is satisfied with the draft scheme. This is required in the legislation.

Some of the latest government comments suggest that they may now have an issue with our approach. In our draft scheme, we indicate that we would seek to regulate LP entities in as similar a manner as possible to the way in which we currently regulate individuals (so far as the legislation permits). This has always been the Society's stated policy, as discussed with the Scottish Government before and after the passing of the Act.

It has always been the Society's view that this approach is the one most likely to promote achievement of the regulatory objectives, particularly those related to consumer and public protection and the promotion of fair competition. We believe it is both possible and reasonable to adapt a scheme of regulation for individuals to apply to entities. We await confirmation from the government of their policy stance on this matter of principle.

December 2012

The Society submitted its application to the Scottish Government to become an approved regulator of new licensed legal services providers today, Monday, 3 December. The Scottish Government will be able to approve a maximum of three LP regulators who will be responsible for regulation of the provision of legal services by the new businesses. Scottish Ministers will consult with the Lord President and OFT as part of the approval process.

November 2012

The further draft of the regulatory scheme, draft Guarantee Fund rules (with explanatory note) and draft solicitor descriptor rules (with explanatory note) have been issued to Council members for consideration in advance of the Council meeting on 23 November 2012.

October 2012

The Wider Working Group set up by the Council has been reviewing and commenting on the scheme as it has been drafted and refined. That group includes practitioners for different backgrounds and practices.

The draft regulatory scheme for licensed providers to be submitted to the Scottish Government was considered and discussed by the Council on 25 October 2012 along with other relevant papers.

Following those discussions, some further amendments have been made to the draft scheme. The Wider Working Group is also considering some of the issues arising and a further draft of the scheme and accompanying papers will be brought forward for formal approval by the Council at its meeting on 23 November after which the approved regulator application will be made to the Scottish Government.

January 2012

This consultation is intended to seek views and inform the Scottish ministers' decision on who should be included in the definition of 'regulated profession' in section 49 of the Legal Services (Scotland) Act 2010, and so be permitted to own a majority or controlling share in a licensed provider.

October 2011

The October 6 date for ABS to go live in England and Wales saw the emergence of one new regulator, the Council for Licenced Conveyancers, which has been able to licence conveyancing firms as ABS.

The Solicitors Regulation Authority, which also plans to regulate ABSs south of the border, is currently waiting for new legislation put forward by the Ministry of Justice on spent convictions  to be approved by MPs before it becomes a regulator. In Scotland, the government has said that its regulations are likely to be finalised early in 2012. This will then allow the Society to apply to the Scottish Government for approved regulator status, with the first new licensed legal services providers potentially appearing in Scotland by late summer 2012.

The Society has prepared a draft handbook  for licensed providers which, although not in its final form, gives an indication of the Society's approach to licensing and regulation of licensed providers. Any firms which are interested in becoming a licensed provider can contact Philip Yelland, Director of Regulation, or Samantha Hollywood at the Society to view a copy and discuss it further.

March 2011

The Legal Services (Scotland) Act 2010 (Commencement No. 1 and Saving Provision) Order 2011 brings into force various provisions of the Legal Services (Scotland) Act 2010. The Act received royal assent on 9 November 2010. Sections 146 to 150 came into force the day after.

Read the full details of the commencement order.

February 2011

The Scottish Government launched a consultation on which professions should be regarded as a regulated professionals. Section 49 of the Act requires that qualifying investors (solicitor investors or a members of another regulated profession) have at least a 51% stake of the total ownership or control of the licensed provider and these will be specified by regulation.

The consultation runs for 12 weeks until 11 May 2011 and the Society encourages the membership to respond directly to the consultation or to make their views known to the Society. A link is attached to the consultation []. The Society intends to respond and this exercise will be coordinated by the law reform team. Any members wishing to respond via the Society should contact Michael Clancy at or Katie Hay at by Thursday 31 March 2011.

November 2010

The Legal Services (Scotland) Act 2010 received royal assent on 9 November. The Act is available on the UK Legislation website.

October 2010

The Legal Services (Scotland) Bill passed its final stage in the Scottish Parliament on 6 October.

August 2010

As the Justice Committee takes a break over summer, discussions between the Society and the Scottish Goverment are ongoing regarding the Legal Services (Scotland) Bill.

The Society's Council is also set to discuss the potential impact of the Bill on the Guarantee Fund at its meeting on 6 August. See our information sheet, Myth-busting the Guarantee Fund, for more information about the fund and how it is administered.

July 2010

Stage 2 of the Legal Services (Scotland) Bill, which took place over four sittings in June, is now complete and the amended Bill has been reprinted.

The Justice Committee and the Minister for Community Safety, Fergus Ewing, debated a considerable number of amendments, many of which had been raised by the Law Society of Scotland.

In its first sitting, the Justice Committee adopted a number of amendments which were suggested by the Society, including: the addition of the promotion of the interests of justice to the regulatory objectives that apply to legal services providers and regulators; and the addition of client confidentiality and ethical behaviour to the professional principles to which providers must adhere.

In its second sitting, the committee rejected proposals for 100% external ownership of licensed legal services providers and agreed that they would need to be at least 51% owned, managed and controlled by solicitors, firms of solicitors or incorporated practices, or members of other regulated professions. This gave effect to the Society's policy, which was adopted following its AGM in May at which the matter was debated.

The committee also discussed the role of the Lord President in relation to the appointment of approved regulators and concluded that his consent should be sought in relation to various aspects of the appointment process. This was another matter on which the Society had been pressing for changes to the Bill. His enhanced participation in the process was described as an important 'constitutional buffer' between the government and the legal profession and necessary to preserve the independence of the profession.

In its third sitting, the committee agreed an amendment to open the Guarantee Fund to all new legal services providers. The Society's own policy position on this matter, as agreed in April 2010, was that only those legal services providers regulated by the Society should be able to contribute and have access to the fund along with traditional solicitors' practices. However, the minister expressed the view that it was legitimate for the Guarantee Fund to be opened up in this way, as it is a statutory fund set up to protect the public, which the Society administers.

Nonetheless, Mr Ewing accepted that the amendment would have implications for the Society and agreed to further talks during the summer to address the Society's concerns and reach a more considered conclusion on how the fund should work in the future. Further amendments are likely to be brought forward at stage 3.

In the fourth and final sitting, an amendment was agreed which put into effect the minister's earlier undertaking to remove provisions of the Bill which would have allowed Scottish ministers to influence the composition of the Council and set the criteria for non-lawyer membership of the ruling body. However, the whole of section 92 was not removed. It retains important provisions to permit non-solicitors to become full voting members of the Council, rather than lay observers as at present. The Society believes that enhancing the role of non-lawyers reflects a statutory duty to promote the interests of the public as well as the solicitors' profession.

It was also agreed that ministers should be allowed, at some future point and following consultation with the Society and others, to change the percentage of non-solicitors or regulated professional ownership of licensed legal services providers.

A further amendment was passed to ensure that the functions of a new regulatory committee are kept separate from the Council; and a proposal to set up a separate representative council at the Law Society was rejected.

The Society will re-engage with both government officials and MSPs on a range of issues in advance of stage 3, which will commence in September.

May 2010

The responses to the Society's consultation on the regulatory scheme for licensed legal services providers (LPs) is now available. View a note from the president to members and the responses.

March 2010

March has been a busy month for the Legal Service (Scotland) Bill team at the Society.

Six ABS roadshows have been delivered in Aberdeen, Glasgow, Inverness, Dundee and Dumfries, finishing in Edinburgh. Members have provided excellent feedback, telling us they are leaving the roadshows better informed on ABSs and how the proposed new legislation will affect them and their businesses. The roadshows have been fully subscribed and have been attended by more than 500 members, prompting requests for further faculty visits, which are now being coordinated.
Questions raised by members at the roadshows are being fed into the ABS FAQs.
The Edinburgh ABS roadshow was held on 18 March, with a speech from Fergus Ewing MSP.

The Society's Council has decided to hold an independent referendum that will allow every member of the profession to vote on whether they support the introduction of ABSs and also if they agree that the Society should apply to regulate ABSs. View details on the ABS referendum.

Legal Services Bill stage 1 report

The Scottish Parliament's Justice Committee published its stage 1 report in March. Visit the parliament website for the full report.

Although the committee recommends to the Scottish Parliament that the general principles of the Bill are agreed to, it nonetheless has a number of reservations. These are largely due to the fact that it did not feel that the witnesses who were in strongest support of the Bill - particularly those from the consumer lobby - put forward enough evidence to support their views. The committee therefore concluded that, while the Bill is potentially significant to larger Scottish law firms, the advantages for smaller firms and consumers are less clear.

The committee also identified a number of specific concerns upon which it has sought further clarification from the Scottish Government. These include:

  • the lack of equivalent Guarantee Fund provisions
  • how licensed providers intend to brand themselves and the potential consequences for transparency and consumer clarity
  • outside investors and the need for a more robust 'fitness for involvement' test

There were specific instances when the committee voiced its agreement with the Society, particularly in relation to concerns about the powers given to Scottish ministers under the Bill and how the role of the Lord President could be enhanced to address the potential lack of independence for Scotland's legal profession when it is regulated by Scottish ministers.

The deadline for completion of stage 1 is now 30 April 2010.

February 2010

Consultation on regulating will writers in Scotland

This consultation considers whether it would be in the public interest to amend the Legal Services (Scotland) Bill, currently at stage 1 in the Scottish Parliament, to introduce provisions for the regulation of will writers. The Society would urge members of the profession and members of the public with an interest to respond. The deadline for submitting your comments is 10 February 2010. Further details are available by clicking on the above link.

January 2010

The Society is holding a series of free roadshows in March to inform all members about the progress of the Legal Services (Scotland) Bill and how it will affect them in practice. The Society's senior management will deliver a short presentation followed by a Q&A session to give members the opportunity to raise questions about the Bill as well as other issues or Society work. The Society is also working on a regulatory and financial model which will be published for consultation with members prior to the first event on 2 March. The roadshows will take place in Aberdeen, Glasgow, Inverness, Dundee, Dumfries and Edinburgh.

December 2009

On 15 December, the Society gave evidence on the Legal Services (Scotland) Bill to the Scottish Parliament's Justice Committee. The committee also heard evidence from the OFT, Which?, the Faculty of Advocates, Professor Alan Paterson, the Society of Solicitor Advocates, the Scottish Law Agents Society, the WS Society, Scottish Legal Action Group, the Scottish Legal Aid Board, the Institute of Chartered Accountants of Scotland, Consumer Focus Scotland, UNITE trade union and Gilbert Anderson, solicitor.

November 2009

On 30 November 2009, the Society submitted written evidence to the Scottish Parliament's Justice Committee on the content of the Legal Services (Scotland) Bill, and to the Finance Committee on the financial implications of the Bill. 
Read the Society's comments on the Bill and the Society's comments on the financial memorandum.

October 2009

The Legal Services (Scotland) Bill was published on 1 October 2009. The Society welcomed its publication, noting that Scotland's legal profession should be able to adapt to best meet the needs of modern society and a global economy. However, the Society remained of the view that the Bill would need to ensure the independence of the legal profession, promote access to justice and maintain robust consumer protections and high standards among those delivering legal services - believing that effective regulation would be key to any plans for change. 
View the Legal Services (Scotland) Bill and monitor how it progresses through parliament.

April 2009

The Society issued a formal response to the Scottish Government's consultation on 3 April 2009. In its response, the Society backed the modernisation of legal services by allowing for alternative business structures. It also suggested that the Scottish Government should take the necessary steps to amend or repeal the legislation that currently impedes or prevents alternative business structures as soon as possible.

View the Society's response.

January 2009

The Scottish Government launched its consultation, Wider Choice and Better Protection, on 5 January 2009. The consultation sought views on the proposed introduction of alternative business structures for the delivery of legal services in Scotland and the regulatory features that will be required to support them.

Proposals for draft legislation included: setting out regulatory objectives and professional principles; regulating ABSs at entity level; introducing a 'fit to own' test for non-lawyer owners; requiring all ABSs to have a head of practice or practice committee; and, requiring all ABSs to provide equivalent levels of professional indemnity and compensation to traditional firms.

The consultation paper also made clear that if the Law Society of Scotland were to be an approved regulator of ABS, it would need to review its governance arrangements. View the consultation paper.

May 2008

Solicitors voted in favour of ABSs at the Society's annual general meeting on 22 May 2008. The final poll after proxies was 801 in favour of the policy paper with 132 votes against.

April 2008

The Society published The Public Interest: Delivering Scottish Legal Services - Policy Paper on Alternative Business Structures.

February 2008

The Society produced an analysis of the consultation responses that it received. A total of 92 responses were received - some from individual respondents, some on behalf of firms and some on behalf of faculties and other organisations.

November 2007

In its response to the OFT report, the Scottish Government invited the Society and the Faculty of Advocates to put forward their own proposals for how restrictions on the legal profession should be lifted. The cabinet secretary for justice announced that there would not be a legal services board in Scotland, saying that it would be 'a disproportionate and inefficient response'.

The Law Society of Scotland launched a three-month consultation on alternative business structures. The consultation was distributed via the Society's e-bulletin and website with a wider stakeholder group receiving email correspondence. Further promotion was given through the Journal and the media. Various prompts were used during the period of consultation to encourage responses.

View the consultation paper.

October 2007

The Legal Services Bill received royal assent.

September 2007

The Society held a conference in Edinburgh, The Public Interest - Delivering Scottish Legal Services. The cabinet secretary for justice was the keynote speaker.

July 2007

The OFT responded to the Which? super-complaint stating that the Scottish Government should aim to have a programme of policies by the end of 2007, detailing how legal services should be regulated and how restrictions could be lifted, and to project a realistic timeframe for these policies to be effected. It also noted that the legal services market in Scotland is different to that of England and Wales and it was therefore important 'to develop an appropriate Scottish solution to any perceived problems'.

June 2007

The Society held a members' event in London on ABS, the future of reform and implications for Scotland.

May 2007

The consumer group Which? made a super-complaint to the Office of Fair Trading asking it to investigate 'how legal rules in Scotland are working against consumer interests' and raising concerns that the legal market in Scotland disadvantages the consumer due to certain regulatory restrictions, including solicitors being prohibited from adopting certain business models and the public from directly accessing the services of an advocate.

January 2007

The Law Society of Scotland established an ABS working party.

November 2006

The Legal Services Bill was introduced into the House of Commons. It took forward most of Clementi's recommendations, ie it made provision for the establishment of the Legal Services Board and the Office for Legal Complaints. In respect of alternative business structures, it went further than Clementi's recommendations, by introducing a 'bare-bones' regulation framework and licensing regime for all ABS.

April 2006

The Scottish Executive Research Working Group published its findings on restrictions in the Scottish legal services market. In respect of alternative business structures, it concluded that while they were likely to stay on the agenda, given the contents of Clementi's report, policy development work would be required to establish the extent to which they suit Scottish circumstances and how they might best be regulated if they were to become a reality in Scotland.

December 2004

Sir David Clementi published his final report, which included the following recommendations:

  • a Legal Services Board should be established
  • front-line bodies should be required to make governance arrangements to separate their regulatory and representative functions
  • an Office for Legal Complaints should be established
  • LDPs should be able to operate, bringing together lawyers from different professional bodies and non-lawyers

March 2004

The Scottish Executive established a research working group to examine whether regulation of the Scottish legal services market is free of anti-competitive restrictions.

July 2003

Sir David Clementi was appointed by the Department of Constitutional Affairs to carry out a review of the regulation of the legal services market in England and Wales.

FAQs - the Legal Services (Scotland) Act and LPs

The Legal Services (Scotland) Act 2010 aims to allow solicitors to provide legal services via a range of different business models which are currently prohibited - such as allowing non-solicitor partners, working in partnership with other professionals (multi-disciplinary practices (MDPs)), and external ownership. The Act, introduced as a Bill by the Scottish Government to the Scottish Parliament on 30 September 2009, is permissive rather than prescriptive legislation to allow increased choice for those running law firms. Traditionally structured solicitor practices will remain.

The Bill also provides:

  • regulatory objectives and professional principles which will apply to regulated businesses and legal professionals
  • powers allowing Scottish ministers to approve and authorise regulators to license legal services providers
  • requirements for all licensed providers to appoint suitably qualified persons responsible for ensuring that the business complies with the regulatory scheme and professional principles
  • safeguards to ensure that those owning or directing a licensed provider are fit and proper persons

The Act received royal assent on 7 November 2010.

The Act aims to broaden access to legal services by allowing the creation of new business structures, in addition to existing solicitor practices, which can provide legal advice and services for clients. It aims to ensure that there are no unnecessary barriers to competition created by restrictions on business organisations or regulatory requirements on practitioners and organisations, and to ensure that any restrictions on the way legal services are provided, are necessary and proportionate to secure the regulatory objectives.

There have been a number of factors which have brought the debate on ABS to the fore, from advances in technology and innovation in business development changing how solicitors work and how legal services can be delivered, to the introduction of the Legal Services Act 2007 in England and Wales following the 2004 Clementi report on ABS.

The consumer group Which? submitted a super-complaint about restrictions in the Scottish legal services market to the Office of Fair Trading in May 2007, which made the issue more acute in Scotland and which resulted in the OFT making recommendations to the Scottish Government to introduce measures to lift these restrictions.

Among the profession, it became clear that there was some appetite for change in Scotland, initially from the larger commercial firms which wanted to be able to be able to structure their businesses to compete on an equal footing with competitors elsewhere in the UK and an increasingly global legal market; but also from some smaller firms which saw an opportunity to develop their businesses and combat the threats that high street businesses are increasingly facing.

A research working group report on the legal services market in Scotland has shown that, while there was no empirical evidence and MDPs are as yet a hypothetical, looking at them in other jurisdictions, eg Germany, it seems they do well, particularly those working for business and commercial clients.

Business practice and the regulatory environment has changed enormously for legal firms and, following the Clementi Report and the introduction of the Legal Services Bill in Westminster in October 2006, the Society set up an ABS working group in January 2007 to consider how alternative business structures might work and what impact they might have in Scotland and the potential impact that new legislation in England and Wales would have in Scotland.

In September 2007, the Society held a conference in Edinburgh, The Public Interest - Delivering Scottish Legal Services. By this time, the OFT had made its recommendations to the Scottish Government following the Which? super-complaint and the cabinet secretary for justice, who was the keynote speaker at the conference, stated that "no change was not an option". He then gave the legal profession the opportunity to take the debate forward and advance proposals for how restrictions on the legal profession should be lifted.

The Society conducted a three-month consultation with its members on how restrictions might be removed. The results of the consultation informed the Society's policy paper, The Public Interest: Delivering Scottish Legal Services. That policy was then voted on by members at its AGM on 22 May 2008, with a majority vote in favour of the Society's proposal, with an amendment. The hand vote was 57 to 20 in favour; the proxy vote was 801 for, which included the 600 from four large firms, and 132 against.

In April 2009, the Society's response to the Scottish Government's consultation, backed the modernisation of legal services by allowing alternative business structures. It also suggested that the Scottish Government should take the necessary steps to amend or repeal the legislation that currently impedes or prevents alternative business structures as soon as possible.

The Society has promoted four key points throughout all stages of policy development and during its evidence sessions before the Justice Committee at the Scottish Parliament. These are:

  • a robust regulatory system must be put in place to provide strong consumer protections and ensure that high standards are maintained among those delivering legal services
  • independence of the legal profession must be maintained
  • a level playing field is required for those in the legal services market, whether as a legal services provider or as a regulator
  • access to justice must not be hindered

In 2010, the Society also consulted widely and held a series of roadshows and faculty meetings as part of its policy development on ABS. The profession voted on the issue a number of times, bringing divergent views. The Society changed its policy to rule out 100% external ownership as a result. Its revised policy in favour of legislation that would allow for 51% ownership of firms by solicitors or solicitors with other regulated professionals and 49% external capital prevailed when MSPs debated and voted on the Bill at stage 3 in October 2010.

As set out in the Act, LPs will be business entities which, through the designated and other persons within it, provide legal services to the general public for a fee and do so under licence issued by an approved regulator.

The legislation aims to increase options for firms in an increasingly competitive marketplace. Firms, big and small, are already diversifying, offering online legal services and other niche market services and there is already an element of cherry-picking going on, with many firms having ceased to do civil legal aid.

There may be motivational advantages in allowing an enhanced role for non-solicitors already working in firms and providing client facing advice or in administration roles. In England and Wales, the first phase of the Legal Services Act has been adopted and non-solicitor managers have become partners or members.

This is already happening in practice within estate agency, wealth management and tax work where accountants, financial advisers and others already work with solicitors.

No. The Act is permissive legislation and does not require firms to change their structure but it creates options. If the traditional partnership model is the most effective for that business, that is the one which should remain. Not to allow change could lead to a drain of talent in Scotland and potentially lead to a downturn and demise of the Scottish legal sector to lasting effect, not only to the profession but to the Scottish economy as a whole. We want talent to remain in Scotland. The legal sector contributes an estimated £1.2 billion to the Scottish economy annually.

This is what the Act says. Given that there is intended to be no advantage or disadvantage for the traditional firms v LPs then it is hard to see why a traditional firm would want to become a LP and make no other changes to its structure.

The Act will permit law firms to restructure if they choose and for new providers to provide legal services in Scotland. There will be a new regulatory framework for LPs.

In all likelihood, many solicitors will choose to retain the solicitor partnership model in order to provide their clients with the legal services they require. However the Act would allow non-solicitor ownership of LPs. It will also allow solicitors to set up in partnership with other professionals, such as surveyors, accountants or architects, and promote existing senior but non-solicitor staff to partner level and allow LPs to seek external capital. All new LPs would require at least one solicitor to be employed in the business and to have a solicitor as head of legal services. We do anticipate demand from our members to create some forms of ABS.

The Society will continue to act as the governing body for the solicitors' profession in Scotland. The Society intends to apply to be an approved regulator of LPs, to meet the anticipated demand from members.

No. The Society is accountable to its membership. It will continue to represent the solicitors' profession while carrying out its regulatory duties and maintaining its obligation to the public interest, which work to ensure the reputation of the profession among its clients, the wider public and other stakeholders, including MSPs and ministers. The Society will continue to represent the Scottish profession and its members whether they are part of a solicitor practice, an in-house team, or those who may become part of a LP.     

The Council believes that the four non-lawyer Council observers and non-lawyers who account for 50% of regulatory committees and Scottish Solicitors' Discipline Tribunal membership currently contribute substantially to the quality and accountability of decision-making. The Society proposes to revise its Council structure to allow up to 20% non-lawyer membership.

Most similar organisations have lay members on their boards and councils. The Society has had non-solicitor Council members since 2011 and they not only meet any obligations there are to the public interest, but bring additional skills, talent and knowledge to the workings of the organisation and to its membership. Non-solicitor members of the Council are appointed through a recruitment process which seeks to comply with the spirit of the Nolan principles.

The intention of the Act is to address both the interests of consumers as well as wider, public interest issues. Clients would expect to have wider access to legal services and will be able to expect the same standards of service, advice and consumer protection from LPs as from solicitor practices.

All solicitors will be expected to work to their professional principles and the profession's core values. The Act provides a set of professional principles to which LPs must adhere. They must:

  • support the proper administration of justice
  • act with independence and integrity
  • act in the best interests of their clients
  • maintain good standards of work
  • comply with duties normally owed to the court when i) exercising a right of audience, or ii) conducting litigation in relation to proceedings in any court

Furthermore, the Act requires both regulators and LPs to act in a way that is compatible with the regulatory objectives which are set out in section 1. These include:

  • supporting the constitutional principle of the rule of law
  • protecting and promoting both the interests of consumers and the public interest more generally
  • promoting an independent, strong, varied and effective legal profession
  • promoting adherence to the professional principles

Scottish solicitors must adhere to a set of core values, as well as to standards of conduct rules which are set by the Society. To ensure that LPs adhere to the same standards, the Act provides a set of regulatory objectives, with which all LPs must act compatibly; and professional principles to which all LPs must adhere. Approved regulators, who are obliged to act compatibly with the regulatory objectives, must create a regulatory scheme to which the legal services providers that they licence have to adhere.

In practice, it is the responsibility of the LP's head of legal services to ensure compliance with the regulatory objectives, professional principles and the approved regulator's scheme. Under the Act, every LP is obliged to appoint a head of legal services who must be a qualified solicitor in possession of a current practising certificate. It is his or her duty to ensure that the firm meets all of its obligations.

The Act allows that regulators can opt to use the existing Guarantee Fund for their LPs or they are required to set up an equivalent fund. There are safeguards for the Society as the operator of the fund in respect of the ability to require regulators to inform the Society of any breaches of the equivalent of the accounts rules and an ultimate power for the Society to carry out its own inspection.

In general terms, the Act guards against corrupt influences by setting out very stringent criteria for each stage of authorisation that must be met before a LP can operate. These stages include:

  • authorisation of approved regulators
  • approval of regulatory scheme, including examination of licensing and practice rules
  • eligibility criteria of licensed providers
  • approval of appointment of head of legal services, head of practice or member of practice committee
  • determination of fitness of outside investors

Scottish ministers may monitor the performance of approved regulators and, in turn, the approved regulators would require LPs to submit an annual performance report. This level of scrutiny reduces the potential for undesirable influences on the legal profession.

The Act also addresses the question of external ownership and/or control of law firms, which is of most concern among those who fear that the Act might result in the corruption of the legal profession. Under the Act, approved regulators must first determine the fitness of outside investors before issuing a licence to a LP. There is a list of relevant factors as to fitness, which includes details about the background, finances and probity of potential investors. Some of these factors would, if met, automatically result in a presumption of unfitness. These include:

For individuals:

  • if the investor is subject to a trust deed
  • if the investor has been adjudged bankrupt and has not been discharged from bankruptcy
  • if the investor is disqualified from holding, or has been removed by a court from, a position of business responsibility (eg director of a charity)
  • if the investor has been convicted of an offence involving dishonesty (and has either been sentenced to 12 months or more in prison, or has been fined at least the maximum level four amount on the standard scale)

For corporate investors:

An outside investor must not act in a way that is incompatible with the regulatory objectives. The role of the head of legal services is important here, as he or she (who must be a qualified solicitor in possession of a practising certificate free of conditions) must report any failure of the LP to fulfil its duties under the Act or any other enactment to the approved regulator. This would include anti-terrorism legislation, proceeds of crime legislation and the serious organised crime provisions of the Criminal Justice and Licensing (Scotland) Bill.

It is stipulated in the Act's regulatory objectives that access to justice must be promoted, making it the first time that there has been a statutory duty to have regard to access to justice issues. Moreover, an approved regulator must provide in its licensing rules how it will deal with a licence application where it believes that granting it would cause (directly or indirectly) a material and adverse effect on the provision of legal services.

It should be remembered that this is an issue which already exists in Scotland. While the Act would make consideration of access to justice a statutory duty, such a complex issue cannot be wholly solved by this piece of legislation and must be addressed at a number of levels.

This may be possible, although whether this will happen is unclear. In New South Wales, Australia, there is at least one listed firm (Slater & Gordon).

Again looking at Slater & Gordon, its original prospectus stated:

"Where an inconsistency or conflict arises between the duties if the company (and the duties of the lawyers employed by the company) the company's duty to the court will prevail over all other duties and the company's duty to its clients will prevail over duties to shareholders."

The primacy of a lawyer's duties to the court as stated in the prospectus are also reflected in Slater & Gordon's constituent documents and shareholder agreements.

Regulation questions

Only approved regulators will be able to regulate LPs. The Society intends to apply for approved regulator status and ICAS may also choose to apply.

It remains to be seen how many applications Scottish ministers will receive from professional or other bodies which are seeking to become approved regulators. However, the size and nature of the legal services market in Scotland is such that there is unlikely to be a complex 'regulatory maze'. The Act as passed limits the number of regulators to three.

Some solicitor firms already have to comply with the regulatory conditions set by more than one regulator, for example the Law Society of Scotland and the Financial Services Authority, or the Office of the Immigration Services Commissioner. From the client's perspective, the Scottish Legal Complaints Commission is likely to remain the single gateway for all legal complaints raised about solicitors, advocates or potentially those emanating from LPs. This is for the Scottish Parliament to decide.

Because of the relative simplicity of the legal services market in Scotland, the Cabinet Secretary for Justice took the view that a Legal Services Board would be "a disproportionate and inefficient response", adding an unnecessary layer of bureaucracy and additional financial burden. The Society agrees with this.

The Act provides that the approved regulator's regulatory scheme must include provision for the prevention or resolution of regulatory conflicts between professional or other regulatory bodies.

If the Society becomes an approved regulator, it would want to work with other relevant bodies to ensure that conflicts - actual or potential - will be dealt with as effectively and efficiently as possible.

The Society intends to apply to become an approved regulator. As such, it would regulate any LP which met its licensing criteria.

The Society will develop a regulatory scheme for LPs. This will be approved by the Council before it is submitted to Scottish ministers as part of the application for the Society to be an approved and authorised regulator.

The Society will continue to represent its solicitor members whether as part of a solicitor practice or a LP.

The professions which currently qualify as “regulated professions” are set out in the Licensed Legal Services (Specification of Regulated Professions) (Scotland) Regulations 2012 made by the Scottish Government. 

You can find the regulated professions which are permitted to set up a Licensed Legal Services Provider listed here in the regulations -  provided that the individual concerned is entitled to practice under regulation by their professional association and meets any other requirements stated.