Tuesday, March 15, 2011

Are Alternative Business Structures Coming to US Law Firms?

We've posted several updates covering the move overseas to allow non-lawyers to invest in and own law firms. Now a similar move is afoot in the United States. A bill recently proposed by a North Carolina state senator has introduced a bill which would allow non-lawyers to own up to 49% of a law firm.

Top of mind in these discussions (and debates) is the roles non-lawyers can play in the firm and the extent to which external investment might create the appearance of or temptation for improper activity. As with UK alternative business structure arrangements, this latest effort attempts to define policies that will assuage concerns. As reported in Forbes, the proposal:
  • "...includes language designed to prevent non-lawyers from interfering with the relationships between attorneys and their clients. Non-lawyer shareholders would be barred from interfering “with the exercise of professional judgment by licensed attorneys..."
  • "That language is designed to allay concerns that lawyers would answer to investors instead of their own clients, or the courts of which they are considered officers."
  • The article also notes that external investment and related influence concerns may already exist, depending on one's perspective: "Right now lawyers borrow money at high interest rates from outside investors who hide behind the fig leaf of providing debt financing instead of equity. But as anyone with a grasp of finance can understand, debt starts to look a lot like equity as the risk levels escalate."

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