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Diary of a Sharemark float: box ticking and regulation

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James Hunt is a solicitor, serial entrepreneur and founder of Everyman Legal – a new type of law firm providing legal services for entrepreneurs. The company of solicitors is the first in the UK to announce it will take advantage of the new practising regime created under the Legal Services Act by seeking a stock market admission. The company intends to trade its shares on Sharemark – a stock market for smaller companies – in the last quarter of 2012. In an honest and open account for Real Business, James Hunt will be charting the ups and downs of preparing his company for an admission.

This is going to be a tough year for me and Everyman Legal. I contemplate the year with a mixture of excitement and some trepidation. We need to achieve three things this year: first, prove that we have a scalable business model; second, convert to an Alternative Business Structure (“ABS”) under the Legal Services Act 2007 to allow non-solicitor shareholders; and third, drive through our plans for admission to Sharemark by the year end.

We started off the year with a bang when our plans for local legal practices operated as franchises was given front-page coverage in the Law Society Gazette, the trade magazine for solicitors. We’re planning three pilot practices during 2012 and, having proved they work, we will establish 70 by the end of 2017.

Getting three really good pilots will be essential to the success of this initiative. While we’re already talking to a number of potential franchisees, we need a good pool of prospects so that we can select the best three. Thankfully, the PR works and I receive five unsolicited calls, and from people with the right profile, and arrange a series of meetings.

Our local legal practices will be JV companies owned 50/50 between Everyman Legal and a franchise principal, with the casting vote held by Everyman Legal. This control means we’ll lose the benefit of small company relief for corporation tax but it’s essential to brand integrity.

After studying other franchise models carefully, we’ve created a model that fits with the best of these. The essence is to drive down central costs and share the resultant cost and efficiency savings with the franchisee. It’s a powerful model which aligns our interests with those of our franchisees.

The Solicitors Regulation Authority (SRA) has announced that it will be accepting applications for Alternative Business Structures (ABSs) at the beginning of January. The stage one online process was surprisingly simple, and we received an email confirming that we will shortly be receiving a suite of forms for completion.

But the SRA has also announced that applications may take up to nine months for assessment. The key challenge is for the SRA to assess whether the Directors and Shareholders with a 10 per cent plus material interest are “fit and proper” persons to control a company of solicitors. As we’re converting an existing regulated company of solicitors to an ABS (and our non-solicitors will hold small minority interests) I’m not expecting any real issues, and April is our target date for registration.

By 31 March 2012, we intend to have completed our final business and marketing plans.  A small equity fund raising of up to £500,000 is planned before 30 June 2012: the funds will enable us to set up all three pilots and lay the foundations for subsequent scale up to 70. So registration as an ABS by end April 2012 is important.

I’ve received an email from the Sharemark team who are keen to discuss our joint plans for an Everyman Legal and Sharemark Admission Pack. With this pack, we’ll develop the standard legal templates for the scheme we have planned. Through this, we’ll systemise the format we are going to apply for our admission.

By systemising this method of joining Sharemark we will empower other companies to follow the same path. Sharemark can be a very cost effective way to raise risk equity or discretely “put a for sale sign up” for a company. We anticipate that others will want to follow our lead and so this pack will also become a great way to market Everyman Legal’s services to ambitious companies.

I am acutely conscious of the mountain to be climbed but it’s been a good start to the year so far!

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