The Solicitors Regulation Authority (SRA) has widened its definition of a ‘small firm’ by doubling the annual turnover limit from £200,000 to £400,000.
The move increases the number of practices which can access the regulator’s ‘small firms’ services from 3,600 to 5,200 – more than half the total number of law firms.
In a separate development, the regulator has also set up a specialist team dedicated to helping small firms needing advice and guidance on compliance issues.
The limit of four on the number of ‘managers’ (partners, members or directors) is not changing.
The SRA said its original definition of ‘small firm’ was criticised as too restrictive by respondents to a discussion paper it launched in November.
The Law Society said it was “concerned about the use of such a precise definition” which created “problems at the upper margin”. Instead of the turnover limit, the society suggested restricting the number of fee-earners to 25.
In its response the SRA said: “We have reviewed our data to inform our definition. We have decided that a small firm will be defined as a sole practitioner or a firm with no more than four partners, members or directors, which has an annual turnover of no more than £400,000.
“We will not include any limit on the number of PC holders, as in practice turnover operates as the appropriate restriction.”
According to SRA figures, 900 law firms with four or less managers have a turnover of more than £400,000 and a further 1,450 firms a turnover of more than £600,000.
The SRA launched a discussion paper in November last year asking small firms for their views on the proposed way ahead.
The regulator has since launched the regulator has launched a small firms team. It is made up of around a dozen staff, who all have experience of working with or at small law firms.
Chief executive Paul Philip commented: “The team understands the needs of small firms and will be able to offer advice that is appropriate for a firm’s size and circumstance.
“It will offer a first point of contact for small firms, making business easier for small firms, while protecting the public.”
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