Can a non-lawyer own a law firm in the UK?

Jan 11, 2023

Written By Claudia Chan

It is easy to assume that only lawyers can own law firms. After all, the word ‘law’ suggests that law firms are for lawyers. However, this article sets out to dispel that assumption: non-lawyers ownership of firms in the UK is possible due to the Legal Services Act 2007.

Legal Services Act 2007

The Legal Services Act 2007 is a significant piece of legislation which reformed legal services in England and Wales. It introduced various reforms aimed to increase the number of consumer-focused legal services providers by creating a new regulatory structure.

The key changes introduced by the Act include:

1) Creation of the Legal Services Board (LSB), a supervisory body designed to oversee eight approved regulators in the legal services market.

2) Creation of the Office for Legal Complaints to deal with initial stages of consumer complaints about legal services.

3) Creation of alternative business structures (ABS) allowing lawyers and non-lawyers to form business together, and for non-lawyers to be involved in the management and ownership of businesses that provide legal services.

4) Requirement for professional bodies to separate representative and regulatory functions.

5) Creation of statutory objectives and duties for all regulatory bodies.

The reform most relevant to the topic of non-legal ownership of law firms is (3).

What is an Alternative Business Structure?

An alternative business structure is a business that allows non-lawyer ownership and management. A non-lawyer can be involved as an investor, partner, or director provided the business obtains a ABS licence.

It can work in four different scenarios:

- A lawyer-owned firm wants to take on a non-lawyer partner

- A law firm want a non-lawyer practice manager to become a co-owner

- A lawyer wants to set up a law firm with a non-lawyer

- A non-legal business wants to incorporate legal services into their business

Benefits of non-lawyer ownership

1. Ability to raise equity outside the legal sector

Since ABSs can operate beyond the legal sector, they can raise funds from outside the legal sector. This enables firms to attract new investments from different markets and go beyond relying on financing from banks.

Furthermore, equity can be raised from a wider range of potential partners, members or directors; such as from other professionals or non-solicitor employees. However, it should be noted that accepting outside investments require greater considerations regarding how a law firm will ensure compliance with Solicitor Regulatory Authority Principles and Codes of Conduct.

2. Possibility for greater of employee intake

ABSs allow non-solicitor employees to be promoted to have a direct stake in the firm. This allows law firms to retain high-performing non-lawyers and attract outside legal talent to fortify their reputation.

3. Encourages multidisciplinary practice

A wider range of services may be provided to clients through ABS rather than just legal services. Law firms can now become a ‘one stop shop’ as legal services can be provided alongside non-legal services. This can promote greater client retention as they are less likely to have source advice - or services - elsewhere, thus creating stronger client relationships.

Limitations of non-lawyer ownership

For the sake of balance, it is also important to consider the potential negative impacts of non-lawyer ownership on a law firm.

1. Impact on firm culture

Some claim non-lawyer managers or owners may negatively affect the culture of the firm as they diminish the idea of a law as a profession by running law firms like a business. Yet, there is no evidence that this is the case.

2. Less ethical practices

Some believe that a possible disadvantage that a law firm might face if they choose to form an ABS is that, if a law firm is run by non-lawyers, it will likely have legal work handled by non-lawyers. There is a concern that non-lawyers will not understand the culture and obligations of solicitors, in particular the regulatory obligations. As a result, the work produced may raise ethical concerns.

However, this argument should be taken with a pinch of salt. There is no evidence to suggest that non-lawyer ownership creates more questionable practices that undermine the quality of legal services.

3. Difficulties opening law firms in foreign jurisdictions

ABS firms may not be accepted by certain foreign jurisdictions, as such, they may hinder a law firm's effort to expand or provide services overseas.

Additionally, this could be an issue for a consumer who wants to stick to a certain firm if they move overseas or travel.

Becoming a Lawyer