The Solicitors Regulation Authority (SRA) has updated its guidance on the steps law firms are allowed to take to form alternative business structures (ABS) in the run-up to the new model's implementation next year.

The SRA this week (29 November) issued an updated version of its guidance 'Preparing for ABSs' designed to explicitly set out what steps the regulator will allow ahead of the full implementation of ABS in October 2011.

ABS – the model often dubbed 'Tesco law' – is the most radical element of the Legal Services Act, which will from next year allow companies to provide legal services and for law firms to seek outside investment.

The guidance stipulates that law firms can currently enter into discussions with potential business partners and set up agreements to enter into exclusive negotiations or non-binding arrangements with a potential business partner.

The SRA will also allow practical preparatory steps such as joint marketing, public announcements or the registration of company names.

An SRA spokesperson commented: "ABSs cannot actually be created until October 2011 [but] we realise that firms are keen to think about how they might structure ABSs and take initial steps towards creating them, but it is important that they do not inadvertently create any ABSs before October. Our guidance will help firms avoid doing that".

The guidance also reaffirms which steps will break the SRA's rules ahead of the ABS rollout. These include any attempt to sell all or part of a law firm's ownership interest, an agreement that puts a future business partner in control of material decisions, or a deal that sees a law firm act as a 'front' for another organisation.

The regulatory body will publish a guide to the ABS application process in April 2011 prior to the launch of the full regime in October.

This new guidance note comes after the SRA earlier this year ordered volume business Optima Legal Services to sever links with outsourcing firm Capita after finding that their arrangement breached the current regime on outside investment in law firms.