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Regulatory Requirements for Starting Your Own Law Practice

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Compulsory management skills training. SRA authorisation. Putting insurance cover in place. Not to mention the raft of regulations you need to comply with once you get the go-ahead to set up shop. These just a few examples of the regulations involved with starting a practice. At first glance, it’s easy to think the whole process of setting up your own law firm has been deliberately contrived to be as off-putting as possible.

There’s no shortage of hoops to jump through. However, it is worth remembering that the purpose of these requirements is not just to protect the public and the standing of the profession, but also to ensure that startup solicitors firms start off on the right footing.

With this in mind, here’s an overview of what’s involved for setting up a solicitors firm in England and Wales:

Who are you dealing with and what do you need?

When setting up your firm, the bulk of your regulatory dealings will be with the Solicitors Regulatory Authority (SRA) — the same body you come across when arranging your training contract and who issues your practice certificate each year.

The SRA

The SRA oversees the process of authorisation. It is the formal go-ahead for a new firm to commence work, for instance. Securing authorisation is the first, and key, regulation you need before you can start up.

To gain authorisation, you must, first of all, meet certain criteria. The SRA refers to this as being ‘qualified to supervise’. For a partnership, at least one of the partners needs to meet the ‘qualified to supervise’ criteria. Also, for a sole practitioner, the individual applying must meet them.

To be qualified to supervise, a solicitor requires the following:

  • You must have been entitled to practice as a lawyer for at least 36 months within the last 10 years. This effectively means that only solicitors of at least three years post-qualification experience are entitled to set up their own firms.
  • You need to have completed a 12-hour management skills training course. The recent changes to the rules surrounding continuing professional development (CPD) mean that this course need not necessarily be CPD accredited. Essentially, as long as the training is not “outside the mainstream of management training”, it should count.

Slightly different rules for different types of firms

To understand these rules, you need to get used to the rather idiosyncratic way the SRA describes different types of organisations. These are as follows:

Recognised bodies and licensed bodies

The majority of new firms are classed as either recognised bodies or recognised as sole practitioners. This describes the situation where all the managers are lawyers. Licensed bodies are firms where a non-lawyer has an ownership stake in the firm of ten percent or more.

Recognised sole practitioners

This is where you have complete ownership of the firm, although you may have other solicitors on board as employees. To get authorisation, sole practitioners need to meet the ‘qualified to supervise’ criteria.

Recognised bodies

Where there are more than one parties who have a stake in the firm, the criteria for authorisation are slightly more complicated. Essentially, the SRA have to make sure that at least one of you is in control of what’s happening across the firm. This includes situations where you are setting up in partnership, and where each of you will have a stake in the business. Pay particular attention to the following:

  • You must appoint a manager – and this manager needs to be a solicitor (or a registered European lawyer).
  • You must fulfil the ‘service requirement’. In other words, the work you carry out should be that which you would normally expect from a firm of solicitors. For instance, a firm that offered will writing and trophy engraving would fall foul of the rules. You can, though, offer certain other services that tend to tie in closely with certain areas of law. These include state agency and trust management, as examples. A full list of permitted other services is provided here.

Licensed Bodies

Do you see yourself going into business with, say, a management consultant or an accountant? If so, the alternative business structure (ABS) model will be appropriate. Here, you require authorisation to practice as a ‘licensed’ body as opposed to a ‘recognised’ body. A licensed body is not restricted by the ‘service requirement’. However, the SRA stipulates that at least one of the managers must be a qualified lawyer.

Making your application: the need for a PII quote

Although your professional indemnity insurance (PII) coverage need not start until you actually commence practice, you need to have a solid quote in place before you apply for authorisation. Essentially, the SRA recognises that to secure that quote, you will have to convince the relevant insurer that you already have everything in place to commence practice on a sound footing. See our guide to Solicitors PII for tips on how to source your cover for more information on this.

For information on business plans and presenting your new business in the best possible light, check out our help centre for a range of up-to-date resources.

 

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