Why employee ownership should be an option for law firms
The legal sector in Scotland is missing out, suggests Douglas Roberts
In recent years, Alternative Business Structures (ABS) have gained traction across the UK, with one model standing out, the Employee Ownership Trust (EOT). The Employee Ownership Association says there are now almost 2,500 employee-owned businesses in the UK, representing around 358,000 employee owners. 30-plus are law firms in England and Wales, where ABS enables a structure whereby the law firm is owned by the EOT on behalf of employees.
Employee ownership is dominated by small businesses (65 per cent) and medium-sized firms (27 per cent), making EOTs particularly relevant to Scotland, where SMEs underpin the economy. While professional and technical services lead the way in EOT adoption, Scotland’s legal sector is largely absent from this trend due to restrictions on who can own a law firm. We have advised accountants and architects in Scotland regarding employee ownership but Scottish law firms cannot choose this route.
This gap is striking given an estimated 40 per cent-plus of Scottish law firms are sole practitioners, many lacking a succession plan, leading to warnings of a looming “succession crisis” in Scottish law. As things stand, despite a statutory basis for non-lawyers holding equity in law firms, under the Legal Services (Scotland) Act 2010, they are de-facto prohibited from doing so, as no system for authorising and regulating these new structures has been set up. A sale to an EOT is not an option in Scotland, so the legal sector is missing out on the power of employee ownership.
EOTs could offer a solution to the succession problem. They create viable succession pathways for smaller firms while preserving culture during ownership transitions. For partners of any size of firm, EOTs enable a softer exit; stepping back gradually and remaining as employees, consultants or directors. This continuity reassures staff who may lack experience in managing complex client relationships and operational decisions. Moreover, EOTs mean employees can share in a firm’s profits, attracting and incentivising all employees, regardless of whether they are legally qualified.
There is certainly an appetite for further support for EOTs and other ABS in Scotland. The ABS Scotland group, officially established in November 2025, claims 20 firms stepped forward to join before it even launched and said “the profession is ready, the market is ready”. Despite this, the Law Society of Scotland (LSS) recently implemented a two-year pause, citing a “lack of interest”. However, we have spoken to law firms in Scotland who want to sell their law firm to an EOT.
There is evidence to suggest the LSS ought to consider allowing all employees to own legal practices. Supporting ABS will unlock further benefits to individual firms and practices, but also to Scotland’s wider legal ecosystem. Despite unexpected changes to the 100 per cent capital gains tax relief available on the sale of a company to an EOT emerging from the recent Autumn Budget, sales to an EOT can still deliver a meaningful tax saving. Furthermore, in a landscape where fewer young solicitors aspire to partnership, opening this pathway to both legal and non-legal colleagues will help secure succession pathways and attract and retain talent at all levels.
EOTs and other ABS won’t suit every law firm, but choice is essential and Scottish solicitors should have the option to sell firms to their staff to create a sustainable future. We suggest the Law Society of Scotland should allow Scottish law firms to grasp the opportunity of employee ownership.
Douglas Roberts is a Corporate Partner, TLT