Alternative Business Structures and the Non-Lawyer Shareholder: A Twitterchat

Currently Law Society Rules do not allow for non-lawyer ownership. While lawyers working for the government can have an attorney general who isn’t a lawyer, and individual lawyers are free to work ‘in house’ for corporations whose shareholders are not lawyers; when it comes to operating a law firm in Canada, lawyers have to be in control.

The UK and Australia allow for different legal business structures, more specifically they allow for non-licensee ownership and surprisingly with little repercussions. Advocates for liberalizing business structures say that this will lead to affordable legal services. There are a few examples of this in the UK, most notably Riverview Law and Cooperative Legal Services, but other than those examples, there is not much evidence that is true. If anything, a surprising number of Alternative Business Structure (ABS) licenses in the UK have been to law firms to add a family member to their company, or to give some ownership to a valued employee.

Those who oppose ABS argue that the non-licensee shareholder will create a conflict of interest for lawyers in doing their job, in other words is this a change that will impact on the professionalism of law. The response by some is to say that regulatory controls can handle conflicts of interest for firms owned by non lawyers just as they do for lawyer owned firms. The other point often raised is that this will lead to aggregation in the industry, and many small firms will be forced out of business. What is unclear is whether that will lead to other jobs, or just an contraction in the legal market.

Tomorrow #cbafutureschat will be looking at alternative business structures, and below is a selection of links that can help you prepare for the talk.

Rachel Zahorsky and William D. Henderson discuss “Who’s Eating Law Firms’ Lunch?” at the ABA Journal; non-lawyer owned Novus Law is tripling revenue every year, doing work that would have previously been done by large law firms.

Johnston isn’t the only corporate client seeking alternative legal service providers and partnerships over the sole reliance on traditional firms—at a hefty swipe at those firms’ bottom lines. In fact in 2012, Novus Law claims, it saved another of its corporate clients nearly $3 for every dollar spent on work originally tasked to another firm. For every $3 it saved the client, Novus Law earned $1 in fees.

Karen Dyck argues that lawyers know the power of words in Non-lawyers are people too:

If our message to those who cannot effectively exercise their legal rights because of their socioeconomic or personal circumstances, or due to systemic barriers that prevent access is a defence of the status quo, then perhaps “non-lawyer” is the appropriate term to use.

Jordan Furlong writes a reaction to the changes to the ownership of law firms in the UK:

The current lawyer-owned law firm business model, with its rictus fixation on annual partner profit, produces unpleasant and undesirable lawyer behaviour all on its own. … Law firms don’t need to fear equity shareholders obsessed with short-term profit who’ll empty the entire piggybank into their pockets every year. They’ve already got those.

And here are a few more sources provided by last week’s Twitter respondents:

  • An article in the ABA’s Law Practice magazine suggests that outside investment may give UK firms a global leg-up, providing capital for innovation, expansion, and talent-poaching.
  • A survey done in the UK in 2012 found that over 70% of ABS listed access to cash flow as an “important” or “very important” reason behind their ABS conversion.
  • Mitch Kowalski suggests that ABS could be the savior of small and solo practices.

If you’ve never participated in a Twitter Chat before, let me explain: it’s a mix of a networking event, and a retro ‘chat room’. Questions are asked by a moderator, and everyone is free to respond and engage with each other’s ideas. It’s a great way to get new perspectives on issues, and to connect with new and interesting people. (Read more about how Twitter chats work.)

The next #cbafutureschat is Tuesday at 7pm ET.

Comments are closed.