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Introducing the New Legal Sector Code

Introducing the New Legal Sector Code

Jason Verwey: Moore PE

Why a Legal Sector Code?

Despite political reforms since 1994, the legal sector remains largely dominated by white male practitioners, especially in senior roles. According to research, the top leadership of many law firms remains homogenous, reflecting the inequalities perpetuated by apartheid. Black legal professionals, especially women, face challenges such as limited access to high-quality legal work, unequal briefing patterns, and under-representation in key areas of law such as corporate, commercial, and intellectual property law​.
 
Vision and Mission

The vision of the Legal Sector Code (LSC) is to transform the legal profession to ensure meaningful participation of black people in the economy, particularly in the legal sector. The mission is to create a sustainable and inclusive legal profession, addressing the unique features of the legal industry through targeted policies and frameworks​.
 
Challenges in the Legal Profession

The historical exclusion of black practitioners from senior roles and high-end legal work persists, leading to a lack of diversity at the top of the profession. The LSC specifically addresses the following issues:

  • Discrimination in procurement: Black practitioners, particularly black women, struggle to secure specialised work from both private and public sectors.
  • Lack of skills and exposure: Black legal professionals have limited access to high-level, specialised legal areas, reducing their competitiveness​.

 
Key Objectives of the Legal Sector Code

The LSC is designed to bring about meaningful change by focusing on several key areas:

  1. Ownership and Management Transformation: The Code emphasizes increasing black ownership in legal practices and enhancing black representation in leadership roles.
  2. Skills Development: Legal firms are encouraged to invest in skills development for black practitioners, especially in specialised legal fields where they have historically been under-represented​.
  3. Supplier and Enterprise Development: The Code promotes preferential procurement from black-owned legal practices, ensuring that these firms gain access to high-quality work from public and private sectors​.

 
How Does This Impact Your Business?

Businesses and state organs that procure legal services will now need to ensure they are compliant with the new LSC guidelines. The Code mandates specific procurement targets for black-owned legal firms, with a focus on firms that are at least 51% black-owned or 51% black-women-owned. This creates new opportunities for collaboration with diverse legal service providers​.
 
Legal Sector Transformation Fund (LSTF)

An important feature of the LSC is the establishment of the Legal Sector Transformation Fund, aimed at providing financial support to black legal practitioners and promoting transformation across the sector​.
 
New Turnover Thresholds for Compliance

The Legal Sector Code introduces specific turnover thresholds to classify legal practices based on their annual revenue, which determines their B-BBEE compliance requirements:

  • Exempted Legal Enterprises (ELEs): Law firms with an annual revenue of up to R5 million (for attorneys) and R3 million (for advocates) are considered ELEs. These firms are exempt from full B-BBEE measurement and only need to submit a sworn affidavit confirming their revenue and black ownership status.
  • Qualifying Small Enterprises (QSEs): Law firms with an annual revenue above R5 million but not exceeding R25 million, and advocates earning between R3 million and R15 million, are classified as QSEs. QSEs are subject to B-BBEE measurement but benefit from simplified scorecards and requirements.
  • Large Entities: Firms with revenue exceeding R25 million (for law firms) or R15 million (for advocates) are considered large entities and are required to comply fully with all elements of the LSC scorecard, including ownership, management control, skills development, and enterprise and supplier development.

 
These new thresholds ensure that smaller legal entities can comply without undue burden, while larger firms are expected to play a more significant role in driving transformation in the sector.
 
What’s Next?

The new Legal Sector Code is set to transform the legal profession by ensuring a more inclusive and equitable future. Firms that adopt and implement the Code will benefit from enhanced recognition under the B-BBEE framework, positioning themselves as leaders in transformation while contributing to the growth and competitiveness of South Africa’s legal industry.
 
If you require assistance in understanding how the new Legal Sector Code impacts your business, or for advice on compliance, feel free to contact us.