Alternative Business Structures FAQs

ABSs present a number of new business opportunities (and also risks) for firms or individuals. An ABS could provide a one-stop shop for professional services, and may therefore have a competitive advantage over ‘traditional’ accountancy or law firms. ICAEW Chartered Accountants may join an ABS as one of a mixed team of lawyers and accountants. Accountancy firms becoming an ABS can (for the first time) employ solicitors in client-facing roles.

Members in practice should also be alert to the possibility of losing staff to a law-firm ABS wishing to widen their services to clients, to include tax or other accounting or business services. By structuring as an ABS, law firms can now offer a partnership to accountants employed by them.

If your ABS decides to recruit a practicing solicitor then they can also provide non-reserved legal activities in addition to the reserved legal activities the firm is authorised to provide.

Currently, solicitors who are working in-house rather than in a firm of solicitors are not able, under the SRA’s rules, to give client-facing advice. They can only give advice to their employer. Once a firm becomes an ABS, that changes and a solicitor can give client-facing advice relating to both the reserved activity for which the firm is licensed and all non-reserved legal activities. This could potentially enhance a good deal of the services traditionally provided by an accountancy firm.

• Section 190 of the Act extends legal professional privilege to an authorised person carrying out reserved legal activities. In the case of probate, privilege extends to the administration of the estate, in addition to the probate work itself.

ICAEW is now an approved regulator of (non-contentious) probate activities as well as a licensing authority for ABSs. There are a number of other ABS regulators including the Council for Licensed Conveyancers (CLC), the Solicitors Regulation Authority (SRA) and the Intellectual Property Regulation Board (IPREG).

• See a complete list of regulators

Which regulator you approach is your decision. Working with ICAEW has the advantage for our members of working with a regulator already familiar with your business and minimises the number of regulators you need to deal with across your business.

An ABS can offer clients the usual suite of services permissible within an accountancy practice, plus whichever reserved legal services the ABS is expressly licensed to provide.

The reserved legal service will be provided by:

• an accountant who has been expressly authorised to provide a reserved legal service;
• a lawyer working within the firm who is already qualified to provide it; or
• someone working under the supervision of one of the above.

In addition by employing a solicitor or other legal professional, an ABS will be able to provide unreserved legal services to clients which are within the usual competence of a lawyer, such as general legal advice and will writing services. When provided by a lawyer, or under their  supervision, these services will attract legal advice privilege.

Every ABS licensed by ICAEW will need at least one individual member authorised to provide probate services. This would most commonly be an individually authorised ICAEW member or a solicitor.
Individuals wishing to make an application for authorisation will need to be appropriately qualified.

For ICAEW Chartered Accountants, this will involve attending a short course and passing an assessment. This short course and assessment is provided by SWAT UK

• More information about the course

If you are not an ICAEW member but you hold a qualification issued or recognised by an approved regulator (for example a solicitor) that entitles you to undertake probate work you may apply for individual authorisation by providing ICAEW evidence of holding such a qualification.

If you are not a member of ICAEW or the holder of a qualification issued or recognised by another approved regulator, but consider yourself to be ‘otherwise qualified,’ you can apply to ICAEW but you must provide sufficient evidence that you are suitably qualified.

• Full details of the criteria applied in such circumstances

The six reserved legal services are:

• the conduct of litigation;
• exercising rights of audience (the right to appear and conduct proceedings in court);
• reserved instrument activities (such as conveyancing);
• probate activities;
• notarial activities; and
• the administration of oaths.

ICAEW is applying to become a regulator of additional reserved legal activities.

The SRA is able to license all of the reserved activities within an ABS, except notarial activities which are expressly reserved to qualified notaries. CLC can only license reserved instrument activities (but limited to conveyancing), probate and the administration of oaths. IPREG can license the exercise of rights of audience, the conduct of litigation, reserved instrument activities and the administration of oaths.

It is irrelevant whether the lawyer within the ABS is already permitted to provide other reserved activities (such as the conduct of litigation) by virtue of their general qualification as a solicitor or barrister. The only reserved activities that can be offered by a lawyer within a particular ABS are those which the firm is expressly licensed to provide.

As stated above, a lawyer can provide general legal advice (such as taxation) within an ABS. However they cannot provide any reserved legal services other than those for which the ABS itself has a licence.

You will need to consider:

Are you an external investor or owner only?

This situation may arise for firms which wish to own a law firm structured as a subsidiary, set up cross investments in partnership with law firms, or similar arrangements.

Before you can set up or acquire your ownership interest in an ABS, you will need to satisfy the regulator you are applying to that you can be approved as an investor or owner. The rules are complex and members should refer to the requirements of the relevant regulator.

Which reserved legal services do you wish to provide within an ABS and which ABS regulator can licence an ABS providing them?

It is not the permitted reserved activities of any individual lawyer that are key, but the reserved activities that the ABS (and therefore any lawyers or other professionals within it) will be licensed to provide. This will then dictate the regulators who can license the business.

The additional regulatory and structural controls required

The requirements of an ABS include:

• appointment of a Head of Legal Practice (HoLP) and Head of Finance and Administration (HoFA), both of whom have statutory compliance responsibilities under the Act;
• membership of a compensation scheme for clients; and
• referral of clients to the Legal Ombudsman (LeO) in the case of any complaints.

In addition you will need to consider whether your Professional Indemnity Insurance (PII) covers all the services you wish to provide, and whether the persons supplying them have the necessary competence.

• Further information on the requirements for an ICAEW licensed firm

Many accountancy firms already have successful and close arrangements with firms of solicitors that do not involve any kind of merger or common firm and will continue with these arrangements.

However, if you wish to formalise the relationship then consider whether this will be by way of an ABS (with the lawyer as your partner) or a group structure. In a group structure, the law- firm element of the group will need to be licensed as an ABS, to accommodate the non- lawyer group ownership.

There is a big difference between accountancy firms that employ solicitors now and those that do so within an ABS. Solicitors within an ABS can be described on the letterhead as solicitors and provide services directly to clients. As practising solicitors they will also be able to generate legal advice privilege covering all the legal advice provided by them or under their supervision.

This is quite distinct from the arrangements that apply to in-house solicitors, who provide services to their firm but not to their firm’s clients. The in-house rules are complex and reference should be made to the SRA Code of Conduct.

• View the SRA Code of Conduct

As an approved regulator and licensing authority, ICAEW can now:

• register individual accountants or other appropriately qualified individuals as authorised probate practitioners;
• authorise entire firms to carry out probate activities; and
• license firms as an ABS able to provide reserved probate services.

In authorised probate firms, all the principals and owners/shareholders (in the case of a company) will have to be individually authorised as ICAEW authorised probate practitioners. In the case of an
ABS, for a firm to be licensed, not all the principals/owners/shareholders have to be individually licensed to carry out probate activities, just a minimum of one.

You can apply to ICAEW for authorisation and licensing in accordance with the Probate Regulations.

In order to apply for probate accreditation, your firm needs to complete and return the application forms and pay the appropriate fee. Your firm will also need to be subject to ICAEW’s Practice Assurance Scheme and comply with diversity monitoring requirements.

• Further information regarding the application process, what forms you need to complete and fees.

Find out more

For further information contact abs@icaew.com or visit icaew.com/probate