You are raising your first funding round and trying to preserve cash. One of your advisers suggests taking equity instead of fees. Can your solicitor do the same?

Or perhaps you are the solicitor. You have been advising a promising start-up, genuinely want to help the founders succeed, and are willing to share some of the risk because you believe in the business. Could you agree to take shares instead of some or all of your fees?

These scenarios are more common than many people realise. The short answer is that there is no outright prohibition on an English solicitor taking equity in a client. The longer answer is that doing so raises a number of professional, regulatory and tax considerations that need to be navigated carefully – and in some situations the arrangement may mean that the solicitor cannot continue acting for the client at all.

This article looks at the regulatory framework set by the Solicitors Regulation Authority (SRA), how the position differs for in-house lawyers, and the UK tax treatment for a solicitor who is paid in shares.

This article is general information and not legal or tax advice. The position is stated as at 12 June 2026.

There is no ban – but there is a conflicts regime

The common assumption that solicitors are simply forbidden from taking equity in clients is mistaken. Nothing in the SRA Standards and Regulations prohibits it as such. What the rules do is regulate the conflict of interest that can arise where a solicitor has a personal financial stake in a client.

The relevant overarching obligations are the SRA Principles, which require a solicitor to act with independence, with integrity, in a way that upholds public trust and confidence in the profession, and in the best interests of each client. The operative restriction sits in the SRA Code of Conduct for Solicitors, RELs, RFLs and RSLs – sra.org.uk.

The own interest conflict rule

The key provision is paragraph 6.1 of the Code: a solicitor does not act if there is an own interest conflict or a significant risk of such a conflict.

The SRA’s guidance on conflicts of interest – sra.org.uk explains that an “own interest conflict” is any situation where the solicitor’s duty to act in the best interests of a client conflicts, or where there is a significant risk that it may conflict, with the solicitor’s own interests in relation to that or a related matter. Critically:

1. If an own interest conflict exists, the solicitor must not act. Unlike conflicts between clients, there is no exception allowing the conflict to be managed through informed consent.
2. Client consent does not cure it. Obtaining the client’s agreement to act, or telling the client to take independent advice, does not change the position.

The SRA’s guidance expressly gives a financial interest – for example, being asked to carry out due diligence on a company in which the solicitor owns shares – as a circumstance that can give rise to an own interest conflict.

What this means in practice is that holding equity does not automatically disqualify a solicitor from acting for that client on every matter. The question is always whether, on the specific matter, the solicitor’s shareholding creates a conflict or a significant risk of one. The risk is at its highest where:

1. the solicitor is advising on the very transaction under which the equity is issued (for example, the funding round, share-for-services arrangement, or the valuation itself);
2. the solicitor’s interests as a shareholder could diverge from the client’s interests on the matter in hand (for example, advising on a sale, a down-round, dilution, or a dispute between shareholders); or
3. the size of the stake, or any board or management role taken alongside it, means the solicitor’s objectivity could reasonably be questioned.

Where the equity is genuinely passive, the matters on which the solicitor advises are unrelated to the value of that stake, and independence is not compromised, the analysis may be different. But each matter has to be assessed on its own facts, and the arrangement under which the equity is acquired in the first place is precisely the kind of matter that should prompt careful consideration as to whether the client ought to obtain independent legal advice.

A note on taking a board seat or becoming an officer

The “lawyer who is given equity but is the start-up’s exclusive lawyer” scenario often comes bundled with a board seat or an officer role. This sharpens the conflict considerably. A solicitor who is also a director owes fiduciary duties to the company in that capacity, which can collide with the independent professional judgment expected of the legal adviser. It also blurs the line on legal professional privilege and on which “hat” the solicitor is wearing when advice is given. None of this is prohibited, but it materially increases the own interest conflict risk and should be approached with real caution.

How the position differs for in-house lawyers

In-house solicitors are subject to the same SRA Principles and Code of Conduct as those in private practice – the obligations are not relaxed. What changes is the context in which they apply.

For an in-house lawyer, the “client” is ordinarily the employing organisation. Holding shares or share options in that employer is extremely common (indeed it is often part of the remuneration package). That does not, by itself, breach the Code. But the same paragraph 6.1 analysis applies: the in-house solicitor must not act on a matter where their personal financial interest as a shareholder or optionholder conflicts, or risks conflicting, with the interests of the employer-client.

The SRA’s own examples of own interest conflict expressly include the solicitor’s “role as an employee”. In-house lawyers also face the well-documented pressure of being an employee while owing professional duties that, where they engage the wider public interest, take precedence over the employer’s commercial preferences. So the better way to frame the distinction is not that in-house lawyers have “more relaxed” obligations, but that the routine holding of equity in the employer is a normal feature of the role which the conflicts rules accommodate on a matter-by-matter basis, rather than a one-off arrangement to be negotiated with an external client.

Tax considerations

Before looking at the tax position, it is worth separating two different scenarios. In one, the solicitor acquires the shares “by reason of employment” (or an office) – these are employment-related securities, which are subject to a separate and more complex set of rules. In the other, the solicitor is acting purely as a supplier who agrees to be paid in shares rather than cash. This note is concerned with the latter; if the solicitor is, or becomes, an employee, director or office-holder of the client, specialist tax advice should be taken on the employment-related securities regime.

Where services are provided in exchange for shares rather than cash, this is likely to be a barter transaction. For a UK-resident solicitor acting as a supplier, the main tax consequences are:

• The shares are taxed as income. Their market value is a trading or professional income receipt, taxed as part of the solicitor’s (or firm’s) profits in the same way a cash fee would have been. Taking equity instead of cash does not avoid the charge; it simply changes the form in which the fee is received.
• The amount taxed is the market value of the shares. In a genuine arm’s length bargain, the value the parties genuinely agree will normally be respected as representing market value, so a realistic negotiated figure will normally stand. This is not a free choice, however: an artificial value, or one agreed between connected parties, may not be accepted for tax purposes. Because valuing unquoted, early-stage shares can be difficult, it is sensible to agree and document the basis for the valuation at the time of the transaction and, where the value is material or uncertain, to seek specialist tax advice.
• How the charge arises depends on how the solicitor operates. A sole practitioner or partner pays income tax and Class 4 National Insurance on that value; where the work is done through a company, it is a trading receipt subject to corporation tax, with a separate question of how value is later extracted to the individual.
• The charge can be “dry”. Tax falls due on the value of the shares when they are received, even though no cash has changed hands, and in an early-stage company the shares usually cannot easily be sold to fund it. This is often the single biggest commercial drawback of being paid in equity.
• A later sale is taxed as a capital gain. The amount taxed as income becomes the base cost of the shares, so on a disposal only the growth above that value is taxed again, avoiding double taxation. Business Asset Disposal Relief will generally not be available to an external supplier, as it requires (among other things) a 5% holding together with an officer or employee role.
• VAT may still apply. Being paid in shares does not necessarily remove the VAT consequences: a VAT-registered solicitor may still need to account for VAT on the value of the legal services, usually payable in cash.

In all cases, the tax treatment of equity-for-fees arrangements is fact-sensitive, and specialist tax advice should be obtained before any such arrangement is implemented.

Key takeaways

For the solicitor

1. The first question is always conflicts: if advising on the matter that creates or affects the equity – for example the funding round or the valuation – gives rise to an own interest conflict, you cannot act, and client consent will not cure it.
2. Keep the equity arrangement itself at arm’s length, and consider whether the client ought to take independent advice on it.
3. Think carefully before taking a board seat or office alongside the shares: it sharpens the conflict, privilege and tax issues.
4. Treat the shares as taxable income at market value, and model the likely ‘dry’ tax charge (and any VAT) before agreeing – you may owe tax in cash on shares you cannot easily sell.
5. Agree and document how the shares are valued at the outset.

For the founder

1. Paying advisers in equity is possible and common, but your lawyer may be unable to advise on certain matters – most obviously the round that issues the shares – so budget for separate independent advice there.
2. Be transparent about valuation and record what is agreed; the value matters for tax on both sides.
3. A lawyer on your cap table or board brings governance and conflict complications: weigh the value of ‘skin in the game’ against the loss of fully independent advice.
4. Equity is not ‘free’ legal work – it carries tax and administrative consequences for both sides, and specialist tax advice is worth taking before you implement it, especially if the lawyer will also be an employee, director or officer.

If you are a founder considering offering equity to your advisers, or an adviser weighing up such an arrangement, the regulatory and tax issues reward careful thought at the outset.

This article is a general summary of the law as at 12 June 2026 and does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice and should not be relied on as a substitute for legal advice.

© MR&T Advisory Limited, 12 June 2026