Frequently Asked Questions regarding Alternative Business Structures and the Future of Legal Services

ABS FAQ header

1. What kinds of business structures are permitted now for lawyers and paralegals?
 
The currently-permitted structures are:
- Sole practice;
- Partnership, including limited liability partnership and multidiscipline partnership;
- Professional corporations (which must be owned by lawyers and/or licensed paralegals); and
- Affiliations.

Lawyers and paralegals are not permitted to provide legal services together with other services except in limited circumstances (the Multi-Discipline Practice).

These structures are further discussed here for lawyers and here for paralegals.

2. What is an Alternative Business Structure (ABS)?

An ABS is an alternative to currently permitted law and paralegal firm structures. “ABS” can refer to both ownership and the services to be provided. An ABS can include non-licensee ownership in an entity providing legal services and/or the provision of non-legal services together with legal services in the same firm or entity.

Alternative Business Structures have been implemented differently in different jurisdictions.  
 
3. What are some real-life examples of ABS in other jurisdictions? 

i) Most ABS in England and Australia provide legal services only. For almost one-quarter of ABS firms, promotion of a non-lawyer to the management of the business was the main factor in the decision to become licensed.

ii) The Co-Operative, a group of businesses which includes Co-operative Legal Services, provides advice on a fixed fee basis (family law, wills, probate, personal injury, conveyancing and employment law). Legal services are provided along with banking, insurance, travel, funeral and pharmacy services, both online and in stores.

iii) Quality Solicitors, a national chain of lawyers’ offices operating under an umbrella brand name, has over 200 locations in England and Wales. It shares customer service protocols as well as a web site which provides legal information and a free initial consultation.

iv) Slater & Gordon, a publicly-traded law firm in Australia, has obtained access to large amounts of capital which it uses to invest significantly in technology and other innovations. The firm offers fixed fees for a large portion of the legal services it delivers.

For additional examples, see the background paper on the services being provided by ABS in other jurisdictions. 

4. What are the key things I need to know about ABS?

i) Although it is said that ABS can lead to innovation in how legal services are provided, innovation can happen without ABS. The practice of law in Ontario has changed significantly in the past number of years, and many lawyers and paralegals are striving to offer legal services in new and different ways. ABS may permit further innovations.

ii) ABS has already been implemented in Australia and in England and Wales. While the results will not necessarily be the same, we have the opportunity to learn from the experiences of those jurisdictions. [see Law Society paper, here, on the emergence of ABS in other jurisdictions, and on the characteristics of the legal services marketplace in Australia and in England and Wales].

iii) In Australia and England and Wales ABS was implemented along with a different type of regulation. In Australia as well as in England and Wales, there has been an evolution towards a proactive, or compliance-oriented, regulatory scheme. Irrespective of the outcome of the discussion regarding ABS, our Law Society is considering a move towards a more proactive scheme.

iv) With access to additional sources of funding, ABS may support greater use of Information Technology by lawyers and paralegals to be able to compete with currently unregulated internet service providers. These internet services are increasingly attracting the public and potential clients for lawyers and paralegals. In the United States, it is suggested that unregulated, online service providers are used by half of consumers and small business owners to meet their legal services needs. An enhanced ability to invest in technology may assist Ontario licensees in providing services to members of the public currently using the unregulated services.

v) Permitting ABS requires regulatory change. Any new regulation should not impede innovation that supports better, accessible, more accessible legal services. Current restrictions may have the opposite effect. 

5. Why is the Law Society studying ABS?

i) Innovation is already happening, and the Law Society needs to consider whether ABS would support greater innovation in the interest of better services for the public. There is tremendous innovation in the delivery of legal services both here in Ontario and elsewhere (for example, the increasing availability of legal services online) and it is in the public interest to consider whether this innovation should also be encouraged within the regulated marketplace with lawyers and paralegals.

ii) Regulatory risks should be managed in a proportionate way. The regulation of business structures for legal services has been liberalized in other jurisdictions and there are lessons to be learned from their experiences. The new regulatory systems implemented in these jurisdictions merit study to determine what if anything we can learn from them.

iii) Would ABS assist in improving access to legal services?  The Law Society has a statutory mandate to govern in a way that facilitates access to justice. Permitting new models for the delivery of legal services and the practice of law may be part of the solution to issues of access to legal services for a large segment of Ontario’s population.

iv) Would ABS provide greater flexibility and viability for practitioners?  The Law Society is considering whether ABS and ABS regulation might enable the development of innovations in the delivery of legal services by offering licensees more choice regarding how they deliver service. Would ABS provide practitioners with greater flexibility to seek out the type of business model that most suits their circumstances? How would this affect the financial viability of the small and sole practitioners who provide retail services to the public? In jurisdictions where ABS is permitted, some practitioners have included spouses or key employees in the ownership of the practice. Others, particularly in England and Wales, have chosen a franchise arrangement which offers access to administrative and marketing support. Would ABS support greater flexibility in practice arrangements (such as work from home) and offer retiring practitioners more options since a law practice could be sold to an individual or entity that is not a lawyer or paralegal? 
 
6. What are the potential advantages and challenges that the Law Society has to take into consideration?
 
The liberalization of restrictions regarding business structures may provide scope for greater innovation in the delivery of legal services. Potential advantages include
- the ability to offer spouses or key employees an ownership share in the practice;
 
- access to new sources of funding which could enable lawyers and paralegals to invest in new technology, marketing or administrative support to make their practice more efficient. New sources of funding also have the potential to lower the cost of legal services and increase profitability;
 
- new practice arrangements, such as a franchise, which would offer practitioners access to administrative support, marketing and branding;
 
- access to new clients who may not currently be able to afford legal services (see paper on unmet legal needs); and
 
- the opportunity to sell a practice to someone other than a lawyer or paralegal upon retirement.
 
• The implementation of ABS would require that certain regulatory challenges be addressed, including  
- increased risk of conflicts of interest, and loss of independence as a result of more flexible ownership arrangements; 
- confidentiality and solicitor-client privilege could potentially be compromised.
 
• ABS would change the concept of legal services delivery even though many licensees will continue to practice without making changes to their business structure. Some see ABS as leading to a commoditization of the legal professions.

7. What is the timeline for the Law Society's consideration of this topic?

Through the balance of 2014 and into 2015, the Law Society is continuing with its efforts to find out the views of lawyers, paralegals and others interested in the subject regarding the issues arising from ABS and to encourage licensees to participate in this discussion. The ABS Working Group will carefully consider the results of this input as it considers the next steps in its study.

8. Are other Canadian law societies studying ABS?
 

Yes. The Nova Scotia Barristers Society issued a discussion paper and launched a Call for Input earlier this year. Other Law Societies are considering this subject.