Legal Services Bill [HL]

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 4 — Additional restrictions
208

      (6)
The licensing authority must consider any representations made within the
prescribed period.
      (7)
If the licensing authority objects to the person’s holding of the restricted
interest, it must notify the person and the licensed body of its objection as
soon as reasonably practicable.
5
      (8)
The notice must—
(a)
specify the reasons for the objection, and
(b)
explain the effect of Part 5 of this Schedule.
37    (1)
The person and the licensed body may before the end of the prescribed
period appeal to the relevant appellate body against the objection.
10
      (2)
The relevant appellate body may dismiss or allow the appeal.
      (3)
If the relevant appellate body allows the appeal it may also—
(a)
order the licensing authority to impose under paragraph 33 such
conditions on the person’s holding of the restricted interest as may
be specified in the order, or
15
(b)
remit the matter to the licensing authority.
      (4)
A party to the appeal may before the end of the prescribed period appeal to
the High Court on a point of law arising from the decision of the relevant
appellant body, but only with the permission of the High Court.
      (5)
The High Court may make such order as it thinks fit.
20
      (6)
If the person’s holding of the restricted interest is subject to conditions as a
result of an order made on an appeal under this paragraph, for the purposes
of this Schedule the conditions are to be treated as having been imposed
under paragraph 33.
Part 4
25
Additional restrictions
Power to impose share limit
38    (1)
Licensing rules may provide that—
(a)
a non-authorised person may not have an interest in shares in a
licensed body which exceeds a limit specified in the rules (“the share
30
limit”);
(b)
the total proportion of shares in a licensed body in which non-
authorised persons have an interest may not exceed a limit specified
in the rules.
      (2)
Licensing rules made under sub-paragraph (1)(a) may provide that a person
35
may be treated as having an interest in shares by virtue of an associate of the
person having such an interest.
      (3)
In relation to a licensed body which is a partnership, for the purposes of
section 34 of the Partnership Act 1890 (c. 39) (dissolution by illegality) a
breach of licensing rules made under sub-paragraph (1) does not make it
40
unlawful for the business of the partnership to be carried on, or for the
partners to carry it on in partnership.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
209

Obligation to notify where share limit exceeded
39    (1)
This paragraph applies in relation to a licensed body if licensing rules made
by the relevant licensing authority make the provision mentioned in
paragraph 38(1)(a).
      (2)
Any non-authorised person who acquires an interest in shares in a licensed
5
body which exceeds the share limit must notify the licensed body and the
licensing authority of the acquisition within such period, after the person
becomes aware of it, as may be specified by order made by the Lord
Chancellor on the recommendation of the Board.
      (3)
It is an offence for a person to fail to comply with a requirement imposed by
10
sub-paragraph (2).
      (4)
A person who is guilty of an offence under sub-paragraph (3) is liable on
summary conviction to a fine not exceeding level 5 on the standard scale.
      (5)
It is a defence for a person charged with an offence under sub-paragraph (3)
to show that at the time of the alleged offence the person had no knowledge
15
of the facts by virtue of which the duty to notify arose.
40    (1)
This paragraph applies if a person under the duty to notify imposed by
paragraph 39(2)—
(a)
had no knowledge of the facts by virtue of which that duty arose, but
(b)
subsequently becomes aware of those facts.
20
      (2)
The person must give the licensed body and the licensing authority the
required notification within such period, after the person becomes so aware,
as may be specified by order made by the Lord Chancellor on the
recommendation of the Board.
      (3)
A person who fails to comply with the duty to notify imposed by sub-
25
paragraph (2) is guilty of an offence.
      (4)
A person who is guilty of an offence under sub-paragraph (3) is liable on
summary conviction to a fine not exceeding level 5 on the standard scale.
Part 5
Enforcement
30
Divestiture
Applicability of divestiture rules
41
Paragraphs 42 to 46 apply to a licensed body which is a body corporate with
a share capital (referred to in those paragraphs as a “relevant licensed
body”).
35
The divestiture condition
42    (1)
The divestiture condition is satisfied in relation to a non-authorised person
and a relevant licensed body if—
(a)
the person holds a restricted interest in the licensed body in the
circumstances mentioned in sub-paragraph (2), and
40

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
210

(b)
the person holds that interest, in whole or in part, by virtue of the
person’s interest in shares in any body (in this Part of this Schedule
referred to as “the relevant shares”).
      (2)
The circumstances are that the person holds the restricted interest—
(a)
as a result of the person taking a step in circumstances in which that
5
constitutes an offence under paragraph 24(1) (whether or not the
person is charged with or convicted of an offence under that
paragraph),
(b)
in breach of conditions imposed under paragraph 17, 28, or 33, or
(c)
in contravention of an objection by the licensing authority under
10
paragraph 31 or 36.
      (3)
For the purposes of sub-paragraph (1)(b), a person has an interest in shares
if the person or an associate of the person has an interest in the shares.
43    (1)
If the relevant licensing rules make the provision mentioned in paragraph
38(1)(a), the divestiture condition is also satisfied in relation to a non-
15
authorised person and a relevant licensed body if the person has an interest
in shares in the body which exceeds the share limit.
      (2)
In this Part of this Schedule, “excess shares” means the number of shares by
which the shares in which the person has an interest exceed the share limit.
      (3)
If licensing rules made under paragraph 38(2) so provide, for the purposes
20
of this paragraph a person has an interest in shares in which an associate of
the person has an interest.
Application for divestiture
44    (1)
If the divestiture condition is satisfied in relation to a non-authorised person
and a relevant licensed body, the licensing authority may give the person a
25
restriction notice under paragraph 45 and apply to the High Court for an
order under paragraph 46.
      (2)
The licensing authority may not make an application to the High Court for
an order under paragraph 46 unless—
(a)
it has notified the person that it intends to do so if the divestiture
30
condition is satisfied in relation to the person and the body at the end
of the relevant period, and
(b)
the relevant period has expired.
      (3)
The relevant period is such period (not less than the prescribed period) as
may be specified in the notice.
35
Restriction notice
45    (1)
A restriction notice is a notice directing that such of the relevant shares or
excess shares (as the case may be) as are specified in the notice are, until
further notice, subject to one or more of the following restrictions.
      (2)
The restrictions are—
40
(a)
a transfer of (or agreement to transfer) those shares, or in the case of
unissued shares a transfer of (or agreement to transfer) the right to be
issued with them, is void;
(b)
no voting rights are to be exercisable in respect of the shares;

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
211

(c)
no further shares are to be issued in right of them or in pursuance of
any offer made to their holder;
(d)
except in a liquidation, no payment is to be made of any sums due
from the company on the shares, whether in respect of capital or
otherwise.
5
      (3)
A copy of the restriction notice must be given to the body to whose shares it
relates.
      (4)
A restriction notice ceases to have effect—
(a)
in accordance with an order of the High Court under paragraph
46(4);
10
(b)
if no application has been made to the High Court for an order under
paragraph 46 before the end of such period as may be prescribed, at
the end of that period;
(c)
if the licensed body ceases to be licensed by the licensing authority.
Divestiture by High Court
15
46    (1)
If the divestiture condition is satisfied by virtue of paragraph 42 the High
Court may, on the application of the licensing authority, order the sale of the
appropriate number of the relevant shares.
      (2)
The appropriate number of the relevant shares is the number of those shares,
the sale of which will result in the non-authorised person no longer
20
holding—
(a)
a restricted interest in the licensed body, or
(b)
if the non-authorised person holds more than one kind of restricted
interest, a restricted interest the person’s holding of which is within
paragraph 42(2).
25
      (3)
If the divestiture condition is satisfied by virtue of paragraph 43 the High
Court may, on the application of the licensing authority, order the sale of the
excess shares.
      (4)
If shares are for the time being subject to any restriction under paragraph 45,
the court may order that they are to cease to be subject to that restriction.
30
      (5)
If the divestiture condition is satisfied by virtue of paragraph 42(2)(b) or (c),
no order may be made under sub-paragraph (1) or (4)—
(a)
until the end of the period within which an appeal may be made
against the imposition of the conditions or the objection, or
(b)
if an appeal is made, until the appeal has been determined or
35
withdrawn.
      (6)
If an order has been made under sub-paragraph (1) or (3) the court may, on
the application of the licensing authority, make such further order relating
to the sale or transfer of the shares as it thinks fit.
      (7)
If shares are sold in pursuance of an order under this paragraph, the
40
proceeds of sale, less the costs of sale, must be paid into court for the benefit
of the persons beneficially interested in them.
      (8)
Any such person may apply to the court for the whole or part of the proceeds
to be paid to the person.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
212

Conditions
Enforcement of conditions
47    (1)
If a person holds a restricted interest in a licensed body in breach of
conditions imposed under paragraph 17, 28 or 33, the licensing authority
may make an application to the High Court for an order under this
5
paragraph.
      (2)
The licensing authority may not make such an application unless—
(a)
it has notified the person that it intends to do so if the conditions are
not complied with before the end of the relevant period, and
(b)
the relevant period has expired.
10
      (3)
The relevant period is such period (not less than the prescribed period) as
may be specified in the notice.
      (4)
The High Court may, on the application of the licensing authority, make
such order as the court thinks fit to secure compliance with the conditions to
which the person’s holding of the restricted interest is subject.
15
      (5)
No order may be made under this paragraph—
(a)
until the end of the period within which an appeal may be made
against the imposition of the conditions, or
(b)
if an appeal is made, until the appeal has been determined or
withdrawn.
20
Records of decisions
Duty to notify Board of decisions under this Schedule
48    (1)
The relevant licensing authority must notify the Board where—
(a)
it has objected under paragraph 19, 31, or 36 to a person’s holding of
a restricted interest, or
25
(b)
it has imposed conditions under paragraph 17, 28, or 33 on a person’s
holding of a restricted interest.
      (2)
The notification must state—
(a)
the reasons for the objection or imposition of conditions, and
(b)
the kind of restricted interest to which the objection or conditions
30
related.
      (3)
If the licensing authority takes any action under paragraph 44 in relation to
a person notified to the Board under sub-paragraph (1), it must notify the
Board of that fact.
      (4)
If there is an appeal to the relevant appellate body against the objection or
35
imposition of conditions, the licensing authority must notify the Board of the
outcome of that appeal (and any subsequent appeal to the High Court).
      (5)
If the licensing authority has imposed conditions on a person’s holding of a
restricted interest, it must notify the Board of any decision taken by it under
paragraph 35 (variation and cancellation of conditions).
40
      (6)
The licensing authority must give the person and the licensed body
concerned a copy of any notification it gives the Board under this paragraph.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
213

49    (1)
A licensing authority must notify the Board where under paragraph 16, 17,
27 or 28 it approves the holding of a restricted interest in a licensed body by
a person included in the list kept by the Board under paragraph 52.
      (2)
The notification must state—
(a)
if the approval was under paragraph 17 or 28, the conditions to
5
which the approval was subject, and
(b)
the reasons for the licensing authority’s decision to approve the
person’s holding of the interest.
      (3)
If the approval was under paragraph 17 or 28 and there is an appeal to the
relevant appellate body against the imposition of conditions, the licensing
10
authority must notify the Board of the outcome of that appeal (and any
subsequent appeal to the High Court).
      (4)
If the approval was under paragraph 17 or 28, the licensing authority must
notify the Board of any decision taken by it under paragraph 35 (variation
and cancellation of conditions).
15
      (5)
The licensing authority must give the person and the licensed body
concerned a copy of any notification it gives the Board under this paragraph.
Power to notify Board where share limit breached
50    (1)
This paragraph applies if the relevant licensing rules make the provision
mentioned in paragraph 38(1)(a).
20
      (2)
The licensing authority may, if it considers it appropriate to do so in all the
circumstances of the case, notify the Board where any person acquires an
interest in shares which exceeds the share limit in a licensed body licensed
by the licensing authority.
      (3)
If the licensing authority proposes to make a notification under sub-
25
paragraph (2), it must give the person and the licensed body a warning
notice.
      (4)
The warning notice must—
(a)
specify the reasons for the proposed notification, and
(b)
state that representations may be made to the licensing authority
30
within the prescribed period.
      (5)
The licensing authority must consider any representations made within the
prescribed period.
      (6)
If the licensing authority notifies the Board under sub-paragraph (2), it must
give the person concerned and the licensed body a copy of the notification
35
and a notice stating the reasons for the notification.
51    (1)
The person concerned and the licensed body may before the end of the
prescribed period appeal to the relevant appellate body against the
notification.
      (2)
The relevant appellate body may—
40
(a)
dismiss the appeal, or
(b)
allow the appeal and order the person’s name to be removed from
the list kept by the Board under paragraph 52.

Legal Services Bill [HL]
Schedule 14 — Licensing authority’s powers of intervention
214

      (3)
A party to the appeal may before the end of the prescribed period appeal to
the High Court on a point of law arising from the decision of the relevant
appellant body, but only with the permission of the High Court.
      (4)
The High Court may make such order as it thinks fit.
      (5)
The licensing authority must notify the Board of the outcome of any appeal
5
under this paragraph, and give the person concerned and the licensed body
a copy of the notification.
Board’s list of persons subject to objections and conditions
52    (1)
The Board must keep a list of the persons in respect of which it receives a
notification under paragraph 48(1) or 50(2).
10
      (2)
The list must record—
(a)
in relation to a person notified to the Board under paragraph 48(1),
the information included in the notification by virtue of paragraph
48(2) and any notification under paragraph 48(3), and
(b)
in relation to any person included in the list, the information
15
included in any notification relating to that person under paragraph
49.
      (3)
If the Board receives a notification under paragraph 48(4) or (5), 49(3) or (4)
or 51(5) it must make such alterations to the list as it considers appropriate
having regard to the decision of the licensing authority or the outcome of the
20
appeal (which may include removing a person from the list).
      (4)
The Board must make the list kept by it under this paragraph available to
every licensing authority.
Schedule 14
Section 102

Licensing authority’s powers of intervention
25
Introductory
1     (1)
This Schedule applies—
(a)
where, in relation to a licensed body and the relevant licensing
authority, one or more of the intervention conditions is satisfied;
(b)
where a licence granted to a body has expired (and has not been
30
renewed or replaced by the relevant licensing authority).
      (2)
The intervention conditions are—
(a)
that the licensing authority is satisfied that one or more of the terms
of the licensed body’s licence have not been complied with;
(b)
that a person has been appointed receiver or manager of property of
35
the licensed body;
(c)
that a relevant insolvency event has occurred in relation to the
licensed body;
(d)
that the licensing authority has reason to suspect dishonesty on the
part of any manager or employee of the licensed body in connection
40
with—
(i)
that body’s business,