The legal landscape in South Africa has shifted with the gazetting of the Legal Sector Code (LSC) on 20 September 2024. This new code, enacted under the Broad-Based Black Economic Empowerment (B-BBEE) Act, replaces the Generic Scorecard for all legal practitioners registered with the Legal Practice Council (LPC), bringing with it a renewed focus on transformation within the sector.

Understanding the Scope

The LSC applies to a wide range of legal entities, from sole practitioners and partnerships to incorporated law firms and advocates. It’s important to note that this code is specific to the legal sector and does not apply to private sector entities measured under other industry codes or legal practitioners not registered with the LPC. The LSC also binds public entities procuring legal services.

This shift may lead to interesting structural changes within legal entities, potentially favoring the growth of professionals within established firms rather than independent legal consultants.

A Long Road to Implementation

The journey to the LSC has been a four-year endeavor, initiated by the Legal Practice Council in 2020. Despite extensive consultation and various drafts, the final gazetted version still requires further clarification to ensure smooth implementation.

One area of concern is the alignment with Statement 003 of the B-BBEE Act, which outlines the principles for developing sector codes. Due to the High Court Application brought in February 2024 compelling the DTIC to gazette the LSC, the DTIC may not have had the opportunity to thoroughly review the LSC in relation to these principles prior to approval, which could result in some inconsistencies.

Objectives and Uncertainties

The LSC aims to drive meaningful transformation and growth within the legal sector, promoting values enshrined in the Constitution and broadening access to justice. While these objectives are widely supported, the code’s current form raises questions about its ability to effectively achieve them.

The establishment of the Legal Sector Charter Council is crucial for the successful implementation of the LSC. This council, yet to be constituted by the Minister of Justice, will provide guidance, clarification, and support to stakeholders in navigating the code.

The Legal Sector Transformation Fund

A key provision of the LSC is the creation of the Legal Sector Transformation Fund (LSTF). Legal practitioners will contribute to this fund, earning B-BBEE points based on their contributions. The LSTF will provide financial assistance, training, and support to black legal practitioners, particularly black women and those from designated groups.

However, the timing of both the Charter Council’s establishment and the LSTF’s operationalization remains a concern for legal entities, especially given the lack of clarity surrounding the scorecard indicators and the need to contribute to the LSTF for compliance.

Implementation Challenges and Hopes for the Future

The LSC’s implementation objectives are ambitious, focusing on equitable representation, improved access to justice, and the development of black legal professionals. While these aspirations are commendable, achieving them will require a clear and well-drafted code that prevents circumvention and ensures effective implementation.

We remain optimistic that the Legal Sector Charter Council will be established soon, providing much-needed clarity and guidance.

Tools for Navigating the LSC

To assist legal professionals in understanding the implications of the LSC, we have developed an LSC calculator. This tool helps assess the impact of the new scorecard on your B-BBEE status level, providing a realistic worst-case scenario given the current ambiguities.

Our BEE123 software further enables clients to align their initiatives with the LSC while maintaining compliance with the Amended Codes of Good Practice for Socio-Economic Development. We are concerned about the removal of this element from the LSC, which appears to deviate from the general principles outlined in Statement 003 of the B-BBEE Act.

In Conclusion

The Legal Sector Code represents a significant step towards transforming the legal profession in South Africa. While challenges and uncertainties remain, we are hopeful that with the establishment of the Legal Sector Charter Council and ongoing engagement with stakeholders, the LSC will achieve its objectives and create a more inclusive and equitable legal sector.

Resources:

• Legal Sector Code as published on 20 September 2024
• Amended Broad-Based Black Economic Empowerment Act 46 of 2013
• https://www.sanews.gov.za/south-africa/minister-approves-legal-sector-code