Apply for ABS licensing as an alternative business structure

An alternative business structure (ABS) is a law firm in which non-lawyers hold ownership or management roles alongside authorised legal professionals. If your planned firm structure includes any person who is not a solicitor, barrister, or other authorised lawyer as a manager or owner, you must obtain a licensed body authorisation rather than a standard recognised body authorisation.

ABS licensing was introduced by Part 5 of the Legal Services Act 2007 to allow new business models in legal services, including external investment and multidisciplinary practices. The SRA is the most commonly used licensing authority for ABS firms.

When you need ABS status

You need ABS licensing if any of the following apply to your firm:

• A non-lawyer is a manager of the firm (for example, a non-lawyer chief executive, managing director, or partner)
• A non-lawyer owns shares in the firm or is entitled to share in its profits
• A non-lawyer has voting rights that allow them to exercise significant influence over the firm

A "non-lawyer" in this context means a person who is not authorised by an approved regulator to carry out reserved legal activities. This includes accountants, management consultants, technology professionals, and external investors.

If you are unsure whether your planned structure requires ABS licensing, contact the SRA's authorisation team before submitting your application. Applying for the wrong entity type causes significant delay.

HOLP and HOFA roles

Every ABS must appoint two compliance roles. The appointment requirement sits in the licensing authority's rules and Schedule 11 to the Legal Services Act 2007, and the duties of the roles are set out in sections 91 and 92 of the Act:

• Head of Legal Practice (HOLP): An individual authorised to carry out reserved legal activities who is responsible for ensuring the firm and its employees comply with the terms of the licence and with regulatory obligations. The HOLP must be a manager of the firm or someone in a position of sufficient authority to fulfil the role effectively.
• Head of Finance and Administration (HOFA): An individual responsible for ensuring the firm complies with the SRA Accounts Rules (if the firm holds client money) and with financial regulatory requirements. The HOFA does not need to be a lawyer but must be approved by the SRA.

Both the HOLP and HOFA must be approved by the SRA as part of the licensing application. They have statutory duties under sections 91 and 92 of the LSA 2007 to report any breach of the licence conditions or any failure to comply with regulatory requirements. Failure to report is itself a regulatory breach.

Non-lawyer approval process

Every non-lawyer who will be a manager or owner of the ABS must apply individually to the SRA for approval. The SRA assesses each person's fitness and propriety, including:

• Character and suitability (criminal record checks, financial probity)
• Whether the person poses a risk to the regulatory objectives
• The person's understanding of their responsibilities under the LSA 2007

Each non-lawyer approval application incurs a separate fee. The SRA may refuse to approve a non-lawyer manager or owner, which would prevent the firm from being licensed in its proposed structure.

Conditions on ABS licences

The SRA has power under section 85 of the LSA 2007 and Rule 9 of the SRA Authorisation of Firms Rules to impose conditions on any licence. ABS firms are more likely to have conditions imposed than traditional law firms, particularly where:

• The firm proposes a novel business model
• Non-lawyer owners or managers have limited experience of legal services regulation
• The firm intends to hold client money from the outset
• The SRA identifies specific risks during the application assessment

Conditions might include requirements to obtain SRA approval before expanding into new areas of law, supervision arrangements for particular activities, or enhanced reporting obligations. Breaching a licence condition is a regulatory matter that may lead to enforcement action.

After licensing

Once licensed, your ABS must comply with all standard SRA regulatory requirements plus additional obligations specific to licensed bodies:

• Notify the SRA of ownership changes: Any change to managers or owners requires SRA approval before the change takes effect. New non-lawyer managers or owners must submit individual applications.
• HOLP and HOFA reporting: Your HOLP and HOFA have ongoing statutory duties to report material breaches. Ensure they understand these obligations and have appropriate authority within the firm.
• Annual renewal: Licensed body status is subject to annual renewal and payment of the regulatory fee, calculated by turnover band.
• SRA Code of Conduct for Firms: Full compliance with conduct standards, transparency rules, and accounts rules (if holding client money).