The solicitors’ compensation fund will take on the risks of alternative business structures indefinitely following the shelving of plans for a separate fund, the Gazette can reveal.

The Ministry of Justice this week laid an order before parliament to retain the current fund for all legal services providers following a summer consultation with the profession. The original terms of the 2007 Legal Services Act included a ‘sunset’ clause for the fund that would cover ABS firms only until 31 December 2012.

Some solicitors had raised concerns about extending the scheme, which compensates clients who have suffered at the hands of law firms, to cover new entrants where the risks are unknown. But the government said it had acted on the advice of the Legal Services Board in deciding to allow the Solicitors Regulation Authority (pictured) to run the compensation fund for ABSs for an indefinite period.

A separate scheme for clients of ABSs is not likely to take shape for at least two years, if it happens at all.

The consultation, which closed in July this year, prompted lengthy debate between regulators and the Law Society. The SRA had argued that the small number of SRA-regulated ABS firms – which currently stands at 32 – meant it would be impractical for them to fund a viable compensation scheme.

It called for the time limit to be lifted until there was more information about the number of ABS firms and the risks they posed.

The Law Society had called for a new sunset date of 31 December 2014 to give the SRA time to review compensation arrangements. Its consultation response added that it was possible that, in due course, experience will show it is ‘inappropriate’ for a single compensation fund to cover both types of firm.