Pagan Osborne now a limited company to take advantage of 'Tesco law'

Published on Thursday 17 March 2011 16:52

LAW firm Pagan Osborne has turned from a traditional partnership into a limited company as it becomes one of the first practices to prepare for the much-vaunted alternative business structures (ABS).

Chief executive Alistair Morris revealed the Edinburgh-based firm is already preparing to let other members of staff become shareholders.

At present, the four equity partners in the 250-year-old firm's former partnership have become the sole stakeholders in the new limited company.

Other staff are expected to become shareholders later this year, when the ABS rules come into force.

Under ABS, non-solicitors will be able to own a stake in a law firm for the first time, leading to the measure being branded as "Tesco law".

ABS reforms - which were approved by the Scottish Parliament last year - will allow law firms to bring in outside investment for the first time and will allow other professionals, such as accountants or surveyors, to form businesses with lawyers. Similar rules are already being introduced south of the Border.

Morris said: "The ABS reforms are good but they're not a means to an end in themselves. We've switched from a partnership to a limited company to allow us to offer a wider range of services to clients."

Morris said Pagan Osborne - which has more than 100 staff spread across five offices in Edinburgh and Fife - was looking to offer more tax advice, wealth management and insurance products.

He added: "The public often has people in pigeonholes - lawyers do law, accountants do accounts and independent financial advisors do investments. I want to break down some of the pigeonholes and say that we can offer everything to you. It's mix and match than a staccato defined service."

Morris said shifting from a partnership to a limited company would allow him to attract top talent to the firm by giving them the chance to buy shares and thus benefit from dividend payments.

The new structure will have tax benefits, allowing the company to retain profits and just pay a small company's level of tax rather than a higher individual's rate; the difference could be as much as 24 per cent against 50 per cent.

Morris said: "If we want to grow then we need to invest cash in the business and this is a tax-efficient way to do that."

But Morris ruled out an expansion into Aberdeen or Glasgow for the time being, instead choosing to focus on the firm's existing offices.

Lorna Jack, chief executive of the Law Society of Scotland, said: "It's difficult to predict exactly what the level of uptake might be for becoming a new legal services provider, but we would expect to see the first appearing in spring 2012."I think there's unlikely to be a sudden flood of new legal services businesses next year, however there has been interest shown already by some of the larger firms, which we might have expected, and some smaller, niche sector firms have also expressed an interest in the opportunities that the Legal Services Act presents and which would allow them to offer new services to their clients."