The Business Of Law (Case Study Sample)

The Business of Law

“Alternative business structures have disrupted the traditional law firm model in new and innovative ways and will continue to do so in relation to future ways of working in law and the business of law firms.”
Description of the current regulatory framework around Alternative Business Structures and how they are disrupting the traditional law firm models
Traditionally, law firms have predominantly been structured as either sole practitionership or partnerships. However, recent years have witnessed have witnessed other options of structuring law firms becoming increasingly prevalent. Available statistics show that whereas sole practitionership and partnerships are still common business structure that law firms operate under, other forms of structures have become popular. One of them is the alternative business structure (ABS). ABS is a new type of legal entity in which a law firm has non-lawyers in their management and ownership structure. The primary motivation behind ABS is the need to allow firms to involve key individuals and/or experts from other fields who bring additional and broader skills and experience in running of the law firms. The non-lawyers are mostly involved through investment or serving as the firm’s directors or partners. The ABS arrangement works in situations where an established law firm makes its non-lawyer practice manager a co-owner; a non-legal business considers legal services as complementary and establishes a standalone business; a practicing lawyer establishes a law firm with non-lawyer owner or partner; and, where an established lawyer-owned firm brings on board a non-lawyer partner.[Jayne Reardon, Alternative Business Structures: Good for the Public, Good for the Lawyers 306] [Christopher Decker, Reform and ‘modernisation’ of legal services in England and Wales, 2] [Tony Williams, Alternative Business Structures: A UK Perspective] [Ian King, Alternative Business Structures: A Brave New Legal Services World?]
With the increasing prevalence of law firms operating under Alternative Business Structure, different countries have developed a regulatory framework around this model. In United Kingdom, the current legal framework around ABS is the Legal Service Act 2007. ABS became a new form of legal entity in UK having been brought by the 2007 Legal Services Act. This legislation came into force between 2008 and 2011. It is a significant piece of legislation that greatly transformed the legal landscape in UK by introducing a variety of reforms that were integral towards improving and enhancing the provision of legal services in the country, as well as placing consumers’ interest at the center of legal and regulatory framework. The regulatory body with the mandate to oversee ABSs is the Solicitors Regulation Authority (SRA). SRA is responsible for judging applications from law firms and/or business entities seeking to use the ABS model. Based on the Legal Services Act 2007, the creation of ASBs allows lawyers to not only form partnerships with non-lawyers but also to accept external investment and operate under external ownership. This legal enablement removed the past requirements that lawyers could only practice in firms whose entire management and ownership is by other lawyers. The legal reforms brought about by the new regulatory framework enables non-legal businesses like retail chains to enter the legal market to offer legal services to consumers.[Raconteur Media, Reaping the benefits of an alternative business structure] [Louise Hill, Alternative Business Structures for Lawyers and Law Firms: A View from the Global Legal Services Market, 136] [Jacob Weberstaedt, English Alternative Business Structures and the European single market] [Patrick Reeve and Nicholas Wright, Alternative Business Structures, 12] [McMorrow, Judith A., UK Alternative Business Structures for Legal Practice: Emerging Models and Lessons for the US] [Jayne Reardon, Alternative Business Structures: Good for the Public, Good for the Lawyers 310]
In spite of the traditional law firm models still being dominant, Alternative Business Structures are significantly disrupting them. These new structures have changed the ownership structure of law firms as law firms are no longer the preserve of lawyers; non-lawyers, and even employees who work in law firms can be part of the ownership. Besides disrupting the ownership structures of law firms, ABS model is also disrupting the scope and approach to service provision. With ABSs increasingly becoming an important legal market place feature, consumers are able to obtain a broad range of legal services from providers outside the traditional legal practice model. This change has been beneficial to consumers in terms of easing the use of legal services and reducing legal costs.[Tony Williams, Alternative Business Structures: A UK Perspective] [Louise Hill, Alternative Business Structures for Lawyers and Law Firms: A View from the Global Legal Services Market, 139] [Christopher Decker, Reform and ‘modernisation’ of legal services in England and Wales, 5]
Besides, ABSs have disrupted the traditional law firm model by dislodging the foundations of the professional partnership in unprecedented ways. As a result of ABSs, the legitimacy and efficacy of in the legal industry improved. It led to the conversions by incumbent law firms into ABSs and also saw the entrance of new firms comprising non-lawyers thereby setting new standards and practicing approach in the legal industry. Unlike the law firms operating under the traditional model, ABSs are more likely to offer high-volume services and tend to be bigger in size and scope of operations. A study on Alternative Business Structures in the UK market following the enactment of the Legal Services act revealed that ABSs have a higher likelihood of being incorporated than traditional law firms, with data showing that about two-thirds of them were incorporated compared to a little above one-third of the traditional firms. It has also been established that ABSs brought pragmatic responses to the industry, which is a critical ingredient in keeping law firm business afloat. ABSs approach to business has seen the legal industry increasingly exploiting new opportunities, an approach that has proved to be a primary driver of change. While many traditional law firms were making considerable efforts to adapt to market changes through strategies like employing professional managers, partner control approach inherent in their model undermined innovation. ABSs brings on board non-lawyers’ owners and managers enjoying a broader latitude, and are thus in a better position to focus on innovation to enhance the competitive advantage of their firms. In other words, ABSs are disrupting the traditional law firm models by providing radical alternative ways of doing business.[Ian King, Alternative Business Structures: A Brave New Legal Services World?] [Raconteur Media, Reaping the benefits of an alternative business structure] [Dan Bindman, Alternative Business Structures May “Dominate in High-Volume Legal Services”] [Jacob Weberstaedt, English Alternative Business Structures and the European single market] [Dan Bindman, Alternative Business Structures May “Dominate in High-Volume Legal Services”]
An analysis of the advantages and disadvantages of new and innovative ways of working in the legal sphere
The introduction of ABSs following coming into force of the Legal Services Act 2007 has brought numerous benefits. The first benefit accrues to clients or consumers of legal services. An increasing percentage of legal services are no longer offered by traditional law firms; ABSs who are proving themselves as radical newcomers are shaking up the legal profession in a huge way and this comes with great advantages to consumers. Although ABS provides regulated reserved legal services, it allows law firms to open up what has for long been a closed profession. It has increased competition in the legal industry thereby providing consumers with broader choices and access to legal services. Consumers who are looking for legal services from ABS-type of law firms tend to enjoy lower legal costs compared to clients who seek these services from traditional law firms. Besides, ABS enables consumers to find all of the legal services at one place. Clients appreciate the convenience of a wide range of services offered by ABS-type of law firms, thus increasing client satisfaction.[Christopher Decker, Reform and ‘modernisation’ of legal services in England and Wales, 8] [Jayne Reardon, Alternative Business Structures: Good for the Public, Good for the Lawyers 313] [Patrick Reeve and Nicholas Wright, Alternative Business Structures, 20] [Tony Williams, Alternative Business Structures: A UK Perspective]
The benefits that consumers get from ABSs are directly interlinked to the advantages that law firms also get. Forming and operating a law firm under the ABS model gives it an edge over the rivals. By providing convenient and broad range services, consumers are likely to prefer an ABS-type over the traditional firms, thus allowing the firm to growth. Growth of the law firm in terms of customer base and revenue is vital ensuring the long-term success of the law firm. It also enables a law firm to attract more opportunities for investors, which is vital in helping in its all-round growth, including expansion to new markets. In addition, law firms that form an ABS for their practice can market themselves as all-encompassing service providers, which not only draw in more customers but also boost their brand image. Compared to traditional law firms who only have solicitors as investors and owners, ABS’s ownership who are not lawyers. These other ...