The other alternative

Responding to the challenge of alternative business structures (ABS) is becoming a familiar refrain to Scottish solicitors’ firms. And whether or not there are advantages to be had in adopting some form of ABS is a decision each practice will have to take.

But is the only choice that of retaining the traditional partnership model or going down the ABS route – perhaps thereby surrendering some part of the control of the firm to non-lawyer interests? It is not, and this year the Journal will seek to profile legal practices that have found new ways of operating, within the current ownership rules, to illustrate that there are indeed alternatives to ABS.

Employee ownership is not a model that readily sits with the rule on solicitor ownership of practices. Yet in October 2012 came the announcement that the first law firm in the UK to be run along such lines was being established, here in Scotland: Fox Solicitors, a niche employment practice led by Carol Fox.

Fox came to the law relatively recently as a mature entrant, following previous careers as social worker and trade union official. Founded only three years ago, her firm has already gone through a number of evolutionary stages.

Trailblazer

Unusually, it began life as a multinational practice – the necessary vehicle for Scottish-qualified Fox and English-qualified Stefan Cross, when they set up first in Newcastle in 2008 and then in Edinburgh in January 2010, as directors of the incorporated practice Fox Cross. As work pressures enforced a separation of the two offices, the Edinburgh practice became wholly Scottish owned and no longer a multinational.

With her firm having from the outset a caseload of some 13,000 equal pay claims, Fox wanted to build into its structure some means of recognising the efforts of her small but dedicated team. A chance sighting of a newspaper article led to her contacting Baxi Partnership, who specialise in advising and supporting businesses that are, or are considering becoming, employee owned. There followed 18 months of discussions with Baxi and the Law Society of Scotland (which was “hugely supportive”, says Fox), along with due diligence and other preparatory work, culminating in the official launch on 8 November.

So how does it actually work? The legal practice, now known as Fox Solicitors, continues to exist, owned by Fox and her colleague Brian McLaughlin as principals – carefully demarcated from the employee interests to comply with the existing rules. It trades as Fox & Partners, supported by the separate service company Fox & Partners Ltd, an arrangement familiar to many larger firms. That company, like others in the Baxi group, is owned by Baxi Partnership Ltd (BPL), which is controlled in turn by a trust set up by a private Act of Parliament that provides for the trustees to retain majority control while promoting ownership of shares in BPL by the various group employees. In effect, therefore, participating employees have a shared interest in assets contributed by the various companies within the group.

Value system

It sounds complicated, and this is partly due to the need to operate within the well known ownership rules concerning legal practices. Did Fox consider waiting for the ABS rules and using them to achieve her goal? “That was the model that came to my mind initially,” she says. “But as discussions proceeded with the Society it became apparent that we could go ahead without ABS, and also it was obvious that the timing of ABS was uncertain. Our structures are not entirely straightforward, but I know that ABS just sounded even more complicated.”

She also admits to a distaste for the traditional partnership model, calling it too hierarchical. “Only a few equity partners at the top of the firm benefit from the hard work of others, rather than sharing the rewards with everyone. That’s what didn’t sit well with me, and employee ownership seemed to be a very good value system and model that fitted well with our ethos of respecting everyone within the workplace.”

As it is, all employees can own BPL shares over time, which they buy or are given through a share incentive plan (SIP). Specific arrangements are put in place to ensure that when people leave, they sell their shares back to BPL, thereby ensuring that business ownership rests with existing employees only. The scheme is new enough that Fox and her team are still learning about it, but, she assures me, everyone is very enthusiastic – the firm’s Christmas outing was combined with a two-day conference in Birmingham run by Baxi.

And with research consistently showing that giving people more involvement in their business increases commitment and business performance, Fox has reason to be optimistic. She adds: “I don’t know why this model hasn’t been embraced more widely, generally within businesses but also within law firms – they talk about partnership, but they’re not really, they’re a very restrictive partnership to those at the top of the peak and it’s a very steep hill to get there. There are a lot of mergers of existing traditional models rather than firms taking the time to think about whether the traditional model is working, whether it is time to review that model, particularly from an equality perspective because I think all the statistics show that there are very few women compared with the number you would expect to see at partnership level.

“Having got to a position where I had some power and influence over the way this firm would operate, I wanted it to work in a different way.”

Get in touch

Has your practice devised a non-traditional ownership structure? The Journal would like to hear from you. Please contact the Editor at peter@connectcommunications.co.uk or phone 0141 560 3018