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High street law firms must adapt or vanish as 'Tesco law' looms

Date:24 JUN 2009

High street law firms need to take urgent action to safeguard their survival as the so called 'big bang' in legal services provision begins to loom.

That is the warning from law firm Mace & Jones. The firm said high street law firms face a critical moment as the Legal Services Board confirmed that the Alternative Business Structure regime will most likely come into force in mid 2011. This will allow non legal bodies such as supermarkets and motoring organisations to sell legal services.

Mace & Jones partnership unit partner Ian Hodgkinson said the reforms, also dubbed 'Tesco law', will have far reaching, and potentially devastating, consequences.

"Firms offering personal injury advice, residential conveyancing, family law and probate work really need to look at the future," he said. "In two years time the 'big bang' will be happening. Those firms which fail to properly plan, adapt and protect themselves face real problems.

Mr Hodgkinson said he is especially concerned because most high street law firms operate as partnerships.

"Small professional services firms of all kinds that operate as a partnership, but particularly high street law firms, are potentially under threat from Tesco Law and need to look at restructuring," he said. "In essence if you operate as a partnership, and the business goes bust, the partners have unlimited personal liability for the debts of the business. However, firms can protect themselves by restructuring as a 'limited liability partnership'. This way the business and not the partners are liable for debts."

Mr Hodgkinson said while it is still unclear how the high street will respond to the 'big bang' some high street estate agents, law firms and accountancy practices could be tempted to merge with each other to survive. Already accountancy firm BDO Stoy Hayward is predicting that up to a quarter of small law firms, and up to 15 per cent of medium firms could merge while a significant number of very small legal practices will cease trading.

"Firms simply cannot plunge their heads in the sand," he said. "Tesco law is coming. There is an urgent need to consider all options for adapting and protecting the business. It is vital to take expert legal advice in partnership law, which is a highly specialised area, to ensure the business stands the best chance of survival and success."