The Legal Services Board has published a consultation paper outlining the core principles it expects all licensing authorities (LAs) to use in regulating alternative business structures, as it moves towards the next stage in liberalising the delivery of legal services.

The paper proposes removing restrictions that have, until now, prevented non-lawyers from owning legal services businesses. The new rules will mean lawyers will be able to provide their services alongside services from non-lawyers, and will allow legal practices to attract external investment.

The paper proposes a stronger regulatory focus on the entity –the systems and activities of the legal service provider as an economic unit – rather than the individual behaviour of lawyers within it.

It also outlines a number of key protections for consumers, including a test to ensure non-lawyer owners and managers of new forms of legal practice are ‘fit and proper’.

New firms would also have to establish two new roles - a head of legal practice and a head of finance and administration to ensure compliance.

The paper also puts forward a widening of the complaints handling system to deal with complaints about firms that deliver a mixture of legal and non-legal services, while ensuring access to the new Office for Legal Complaints.

LSB chair David Edmonds said: ‘When in place, the new proposals will enshrine and reinforce the essential protections that consumers - and citizens - require. Access to justice and the protection that society as whole has through the maintenance of the rule of law must not be put at risk. The provision of legal services in England and Wales must meet the legitimate demands of the society it serves.’

He added that the new proposals will give lawyers and new business partners greater flexibility in how to organise and collaborate with each other and other professionals.

‘We want to encourage new entrants into the legal services market to bring new ways of working and new competitive pressures. These will increase choice for consumers, while offering better-tailored and better value packages of professional services,’ he said.

Edmonds added: ‘This is not the end of the process – we shall work closely with consumer bodies and the regulatory and representative arms of the profession to get the details right. The job of the LSB is to create a market with proper protections, not to prescribe the detailed rules.’

The LSB sets out a framework of core outcomes that licensing authorities will be required to adopt and proposes they take a risk-based approach to regulation in accordance with these outcomes, rather than prescribing strict rules.

In the paper the LSB says: ‘We do not consider that adopting this approach in any way equates to "light touch" regulation. In fact, this approach will give LAs increased flexibility in their enforcement enabling the focus to be on the "spirit of the law".’

The consultation ends on Friday 19 February 2010. Two further papers will be issued in early December looking at designing approved regulators as licensing authorities, and compliance and enforcement – a statement of policy in relation to cancellation of designation as a licensing authority.