The Legal Services (Scotland) Act 2010 allows for solicitors to set up businesses, known as licensed legal services providers (LPs), with non-solicitors.

A similar arrangement for alternative business structures (ABS) is already in place in England and Wales.

Scottish LPs would be required to be majority owned (at least 51%) by regulated professionals. The professions which currently qualify as 'regulated professions' under the Act 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.

See our Q&A below for more information. If you have any further questions or comments about licensed providers, please contact Samantha Hollywood.

Q&A: Legal Services (Scotland) Act and Licensed Legal Services Providers

As set out in the Legal Services (Scotland) Act 2010, 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.

Only approved regulators will be able to regulate LPs. The Society has applied for approved regulator status. As such, and if authorised, it would regulate any LP which met its licensing criteria.

While it remains to be seen how many applications Scottish ministers will receive from professional or other bodies seeking to become approved regulators, 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.

The Act will permit law firms to restructure if they choose and for new providers to provide legal services in Scotland following the authorisation of a regulatory framework and regulator 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 allows for non-solicitor ownership of LPs. This would mean solicitors could 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. 

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.

The legislation aims to increase options for law firms in an increasingly competitive marketplace. Firms, big and small, are already diversifying, offering online legal services and other niche market services.

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.

Scottish Licensed Legal Services Providers would be required to be majority owned (at least 51%) by regulated professionals. 

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.

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 in the interest of justice and integrity
  • act in the best interests of their clients and keep clients' affairs confidential
  • 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
  • meet their obligations under professional rules
  • act in conformity with professional ethics

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 and the interests of justice
  • protecting and promoting both the interests of consumers and the public interest more generally
  • promoting access to justice and competition
  • promoting an independent, strong, varied and effective legal profession and encouraging equal opportunities
  • 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 their duty to ensure that the LP  meets all of its obligations.

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 their duty to ensure that the firm meets all of its obligations.

The Act also sets 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.

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 or, in respect of any offence, has either been sentenced to 12 months or more in prison, or has been fined at least the 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) Act.

The Act allows that regulators can opt to use the existing Client Protection Fund (formerly known as the 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.

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.

Regulation and compliance

As the professional body and regulator for Scotland's solicitor profession we assure the quality of legal services and protect the public interest. Find out more about our regulatory work.