Despite a handful of well-publicised problems at alternative business structures (ABS), there are no shortage of entrants looking to pursue the ‘Tesco Law’ model. Just how many was confirmed this week when it emerged that that Solicitors Regulation Authority (SRA) has now awarded more than 200 ABS licences.
The move is a startling figure coming less than two years since the regime to consider ABS applications went live. City media boutique Wiggin became ABS number 200, and will operate as an ABS from the start of next month, while corporate boutique firm Gunnercooke came in at number 201 and is to become effective as an ABS structure in mid-November.
The latter firm’s founding partner Darryl Cooke had previously established an innovative structure of a partner-only fixed-fee model in order to reduce overheads. Having launched its City presence in December 2012 with the appointment of former Clifford Chance lawyer Sofia Hinkley to lead the private equity focused practice, its latest ABS application moves the firm further away from traditional legal models.
The flood of ABS licences comes despite a handful of the early adopters facing significant reverses. Earlier this month the Stratford-upon-Avon firm GPB Solicitors became the first ABS to have its licence revoked, while Newcastle-under-Lyme-based Hacking Ashton officially entered into liquidation last Friday (25 October).
GPB Solicitors landed itself in hot water with the SRA in early October, when the regulatory body officially intervened on the grounds of suspected dishonesty on the part of an employee, as well as alleged failure to comply with its accounts rules. Such an intervention means that the SRA closed the firm with immediate effect, despite GPB having only acquired its ABS status in February, taking hold of all client money and papers possessed by the firm.
Hacking Ashton, meanwhile, entered into liquidation following a meeting of creditors earlier this month. The partnership is now being handled by Duff & Phelps liquidators Matt Ingram and John Whitfield. Creditors were advised at the Friday meeting on the many strands which led to the demise of the firm, including how declining fee income had led to losses, which in turn had resulted in the practice having insufficient cash to pay its annual professional indemnity insurance this month.
Ingram said: ‘Despite our best efforts working with the partners of the practice over the last few weeks, we have been unable to find a buyer to take the business forward. Despite a good level of initial interest, strict legal profession rules can lead to a purchaser being deemed to be the “successor practice”, which in certain circumstances leads to serious risks for the acquiring party. In this case, evidently, those risks have been detrimental to securing a going concern outcome, which has resulted in the meeting of creditors to place the partnership into liquidation.’
Former Hacking Ashton managing partner Clive Woolliscroft commented: ‘The practice stopped taking on new matters at the end of September and since then our staff have been fantastic in trying to ensure that live files were transferred in an orderly manner, despite knowing that they were likely to lose their jobs in the very near future.’
He added: ‘By ensuring that all client files have been either transferred to alternative solicitors firms or are secured and under the liquidators control SRA intervention has not been necessary. The liquidators will continue to work with officials to ensure that clients’ data is not put at risk.’
There has also been some focus on whether the financial problems this year impacting on the wider Co-operative Group, will dim the ambitions of its Co-operative Legal Services arm – one of the most touted alternative providers to enter the market.
However, with a continued flow of investment into the liberalising legal services market and major players like Capita, KPMG and EY indicating an interest in securing ABS accreditation, the ‘Tesco Law’ bandwagon looks to be picking up speed.
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sarah.downey@legalease.co.uk