1. How long does the ABS application process take?
About three months, sometimes less, from the time we submit an application. The secret to a smooth authorisation is putting together a compelling, complete and well drafted application. We should be looking at making the Authorisation Officer’s life easy, by putting all relevant information front-and-centre. Warts and all.
Also factor in the time it takes to obtain an insurance quote (often two or three weeks), put together financials and the application.
From start to finish the average timescale, start to finish, is four to five months. Complex applications, or those involving lots of people who need to be authorised, can take longer.
2. How much does an ABS application cost?
SRA fees vary, depending on the number of people or entities that need to be authorised. The application fee is £2,000 and there is a £150 charge per individual/entity authorisation.
If you are caught by the Money Laundering Regulations, you will also have to pay for basic DBS checks on every beneficial owner, officer and manager of the firm.
Consultants’ fees to help get you through the application range from about £5,000 to £20,000 – again, depending on complexity.
3. What is the minimum shareholding that I need to give someone in my ABS?
There is no mandated minimum shareholding, so this is purely a commercial decision. What you need to consider instead is, does our proposed structure qualify as an ABS?
As a rule of thumb, if you are proposing to have some element of non-lawyer ownership or control, the ABS requirements are likely to be triggered, regardless of percentage shareholdings.
However, although the firm itself will need to be an ABS, minor shareholders do not automatically need SRA approval. This is complex area of the Legal Services Act 2007.
4. Can an ABS own other companies?
Yes, although beware there are rules around separate (unregulated) businesses.
Trust corporations are becoming increasingly popular, for example.
5. Can an ABS be part of a group?
Absolutely. There is a huge amount of flexibility in the ABS model. Simply adding a holding company between the lawyer owners and the law firm will trigger ABS.
6. Can a COLP and COFA be involved in another law firm?
Technically yes, although they will need additional authorisation for the new firm. And the SRA will always ask, how are you going to split your time and maintain compliance in both firms? You will have to have a compelling answer to that.
7. What documents do I need to make an ABS application?
It depends on the proposed model, but at a minimum you will need:
- Main application (FA1 form)
- Individual applications for every person who needs authorisation (FA2 form)
- Individual applications for every entity (e.g. holding company) that needs authorisation (FA3 form)
- Notice of succession if taking over an existing practice
- Financial services notification if you conduct insurance distribution or any other exempt financial services (most law firms are on the FCA register as exempt professional firms) (FA8 form)
- Money laundering application if you are caught by the MLRs (FA10 form)
- Professional indemnity insurance quote, or held cover letter
- Organisation structure
- Financial projections and business plan
- Certificates of good standing for any individuals who are or who have previously been regulated under a separate regulator (e.g. Bar Council).
We often find there are ancillary bits of information that are worth including in the application to give the Authorisation a full picture and to aid their decision making.
8. Are there any restrictions on reserved legal activities?
No – an ABS can conduct the same reserved legal activities as a ‘traditional’ law firm (subject to having qualified people in place, of course).
9. Do I have to conduct reserved legal activities?
Technically not. But the ABS is expected to conduct legal services as its main business.
10. Who needs authorisation in my ABS?
This can be very technical, but usually
- the non-solicitor Director/Partners (‘managers’)
- the non-lawyer owners with more than 10% interest or significant influence (‘material interest holders’)
- the corporate owners with more than 10% interest
- the ‘associates’ of a material interest holder(minority owners with a relationship to another owner)
- COLP and COFA, unless they are ‘deemed approved’ under the Authorisation of Firms Rules.
- Plus, all beneficial owners, officers and managers of the firm will need separate approval under the Money Laundering Regulations (if relevant).
