Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 11 — Licensing rules
Part 4 — Regulation
187

Part 4
Regulation
Fees
21    (1)
The licensing rules must require licensed bodies to pay periodical fees to the
licensing authority.
5
      (2)
The rules may provide for the payment of different fees by different
descriptions of licensed body.
Financial penalties
22
The licensing rules must make provision as to—
(a)
the acts and omissions in respect of which the licensing authority
10
may impose a penalty under section 95, and
(b)
the criteria and procedure to be applied by the licensing authority in
determining whether to impose a penalty under that section, and the
amount of any penalty.
Disqualifications
15
23    (1)
Licensing rules must make provision as to the criteria and procedure to be
applied by the licensing authority in determining whether a person should
be disqualified under section 99.
      (2)
Licensing rules must make provision—
(a)
for a review by the licensing authority of a determination by the
20
licensing authority that a person should be disqualified;
(b)
as to the criteria and procedure to be applied by the licensing
authority in determining whether a person’s disqualification should
cease to be in force;
(c)
requiring the licensing authority to notify the Board of any
25
determination by the licensing authority that a person should be
disqualified, of the results of any review of that determination, and
of any decision by the licensing authority that a person’s
disqualification should cease to be in force.
Suspension or revocation of licence under section 101
30
24    (1)
Licensing rules must make the following provision.
      (2)
The licensing authority may suspend or revoke a licensed body’s licence
under section 101 in the following cases.
      (3)
The first case is that the licensed body becomes a body which is not a
licensable body.
35
      (4)
The second case is that the licensed body fails to comply with licensing rules
made under paragraph 16 (carrying on of licensed activities).
      (5)
The third case is that—
(a)
a non-authorised person holds a restricted interest in the licensed
body—
40

Legal Services Bill [HL]
Schedule 11 — Licensing rules
Part 4 — Regulation
188

(i)
as a result of the person taking a step in circumstances where
that constitutes an offence under paragraph 24(1) of Schedule
13 (whether or not the person is charged with or convicted of
an offence under that paragraph),
(ii)
in breach of conditions imposed under paragraph 17, 28, or
5
33 of that Schedule, or
(iii)
the person’s holding of which is subject to an objection by the
licensing authority under paragraph 31 or 36 of that
Schedule,
(b)
if the relevant licensing rules make the provision mentioned in
10
paragraph 38(1)(a) of that Schedule, a non-authorised person has
under those rules a shareholding in the licensed body, or a parent
undertaking of the licensed body, which exceeds the share limit,
(c)
if the relevant licensing rules make the provision mentioned in
paragraph 38(1)(b) of that Schedule, a non-authorised person has
15
under those rules an entitlement to exercise, or control the exercise
of, voting rights in the licensed body or a parent undertaking of the
licensed body which exceeds the voting limit,
(d)
if the relevant licensing rules make the provision mentioned in
paragraph 38(1)(c) of that Schedule, the total proportion of shares in
20
the licensed body or a parent undertaking of the licensed body held
by non-authorised persons exceeds the limit specified in the rules, or
(e)
if the relevant licensing rules make the provision mentioned in
paragraph 38(1)(d) of that Schedule, the total proportion of voting
rights in the licensed body or a parent undertaking of the licensed
25
body which non-authorised persons are entitled to exercise, or
control the exercise of, exceeds the limit specified in the rules.
      (6)
The fourth case is that a non-authorised person subject to the duty in section
90 in relation to the licensed body fails to comply with that duty.
      (7)
The fifth case is that the licensed body, or a manager or employee of the
30
licensed body, fails to comply with the duties imposed by section 176.
      (8)
The sixth case is that—
(a)
the licensed body fails to comply with licensing rules made under
paragraph 9(3) or 18 (prohibition on disqualified managers and
employees), and
35
(b)
the manager or employee concerned was disqualified as a result of
breach of a duty within section 99(4)(c) or (d).
      (9)
The seventh case is that the licensed body is unable to comply with licensing
rules made under—
(a)
paragraph 11 (requirement for Head of Legal Practice), or
40
(b)
paragraph 13 (requirement for Head of Finance and
Administration).
     (10)
Before suspending or revoking a licence in accordance with sub-paragraph
(2), the licensing authority must give the licensed body notice of its
intention.
45
     (11)
The licensing authority may not suspend or revoke the licence before the end
of the period of 28 days beginning with the day on which the notice is given
to the licensed body (or any longer period specified in the notice).

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
189

25
Licensing rules may make provision about other circumstances in which the
licensing authority may exercise its power under section 101 to suspend or
revoke a licence.
26    (1)
Licensing rules must make provision about the criteria and procedure the
licensing authority will apply in deciding whether to suspend or revoke a
5
licence, or to end the suspension of a licence, under section 101.
      (2)
They must make provision for a review by the licensing authority of a
decision by the licensing authority to suspend or revoke a licence.
Schedule 12
Section 84

Entitlement to make an application for a licence to the Board
10
Application to Board
1     (1)
A licensable body may apply to the Board for a decision that the body is
entitled to make an application for a licence to the Board acting in its
capacity as a licensing authority.
      (2)
An application under sub-paragraph (1) may be made only on one of the
15
grounds specified in this paragraph.
      (3)
The first ground is that—
(a)
there is no competent licensing authority, and
(b)
there is no potentially competent licensing authority.
      (4)
The second ground is that—
20
(a)
each competent licensing authority has determined that it does not
have suitable regulatory arrangements,
(b)
if one or more competent licensing authorities have made an
application to the Board under Part 3 of Schedule 4 for the approval
of alterations of their regulatory arrangements, each of those
25
authorities has determined that it will not have suitable regulatory
arrangements if the application is granted, and
(c)
each potentially competent licensing authority has determined that
it will not have suitable regulatory arrangements if it becomes a
competent licensing authority.
30
      (5)
The third ground applies only in relation to a licensable body within sub-
paragraph (6), and is that—
(a)
the body has made an application for a licence to each competent
licensing authority which has suitable regulatory arrangements, and
(b)
no such licensing authority is prepared to grant the body a licence on
35
terms which are appropriate to that body, having regard to the
matters in section 106(5)(a) to (c) and any other matter specified in
rules made by the Board for the purposes of this sub-paragraph.
      (6)
The licensable bodies within this sub-paragraph are—
(a)
a not for profit body;
40
(b)
a community interest company;
(c)
an independent trade union;

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
190

(d)
if an order under section 106(1)(e) so provides in relation to a
description of body prescribed under that section, a body of that
description.
Board’s decision on an application under paragraph 1
2     (1)
On an application under paragraph 1 the Board must, before the end of the
5
decision period, decide whether the licensable body is entitled to make an
application for a licence to the Board acting in its capacity as a licensing
authority.
      (2)
The decision period is—
(a)
in relation to an application on the first ground, the period of 14 days
10
beginning with the day on which the application is made,
(b)
in relation to an application on the second ground, the period of 28
days beginning with the day on which the application is made, and
(c)
in relation to an application on the third ground, the period of 60
days beginning with the day on which the application is made.
15
      (3)
The Board must give a notice to the licensable body—
(a)
stating its decision, and
(b)
giving reasons for its decision.
      (4)
The Board must make rules providing for a review of any decision made by
it under this paragraph.
20
      (5)
The rules may in particular provide that if the Board decides to grant the
application, the Board may review that decision if the ground on which the
application was granted ceases to be made out before the Board (in its
capacity as a licensing authority) determines any application for a licence
made by the licensable body.
25
Licensing authority’s duty to make relevant determinations
3     (1)
A licensable body may apply to each competent licensing authority for—
(a)
a determination as to whether the authority has suitable regulatory
arrangements;
(b)
a statement as to whether the authority has made an application as
30
mentioned in paragraph 1(4)(b) and if it has, a determination as to
whether, if the application is granted, the authority will have suitable
regulatory arrangements.
      (2)
A licensable body may apply to each potentially competent licensing
authority for a determination as to whether it will have suitable regulatory
35
arrangements in place if it becomes a competent licensing authority.
      (3)
A competent (or potentially competent) licensing authority to which a
licensable body makes an application under sub-paragraph (1) or (2) may
require the licensable body to provide it with such information in relation to
the licensable body as it may specify.
40
      (4)
The authority may specify only information which it reasonably requires for
the purpose of making the determination applied for.
      (5)
A competent (or potentially competent) licensing authority to which an
application is made under sub-paragraph (1) or (2) must make the
determination before the end of—
45

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
191

(a)
the decision period, or
(b)
if it requires the licensable body to provide it with information under
sub-paragraph (3), the period of 28 days beginning with the day on
which the information is provided.
      (6)
The decision period, in relation to an application under sub-paragraph (1) or
5
(2), is the period of 28 days beginning with the day on which the application
is made.
“The Board”
4
In this Schedule references to the Board, unless otherwise stated, are to the
Board acting otherwise than in its capacity as a licensing authority or an
10
approved regulator.
“Competent licensing authority”
5
“Competent licensing authority”, in relation to a licensable body, means an
approved regulator designated as a licensing authority in relation to each
reserved legal activity which the licensable body proposes to carry on.
15
“Potentially competent licensing authority”
6     (1)
“Potentially competent licensing authority”, in relation to a licensable body,
means an approved regulator—
(a)
which has made an application to the Board under Part 1 of Schedule
10 for a recommendation that the Lord Chancellor make a relevant
20
designation order, and whose application has not been determined,
or
(b)
in respect of which the Board has made such a recommendation, but
in respect of which no relevant designation order (or decision not to
make such an order) has been made by the Lord Chancellor.
25
      (2)
A relevant designation order is an order—
(a)
designating the approved regulator as a licensing authority in
respect of one or more reserved legal activities, and
(b)
the effect of which will be that the approved regulator becomes a
competent licensing authority in relation to the licensable body.
30
“Suitable regulatory arrangements”
7     (1)
“Suitable regulatory arrangements”, in relation to a licensable body and a
competent licensing authority, means regulatory arrangements which are
suitable in relation to the licensable body, having regard to—
(a)
the composition of the licensable body, including in particular the
35
matters in sub-paragraph (2);
(b)
the services the licensable body proposes to provide;
(c)
if the licensable body proposes to carry on non-reserved activities,
any regulation to which the carrying on of such activities is subject;
(d)
the persons to whom the licensable body proposes to provide
40
services.
      (2)
The matters are—

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
192

(a)
the kinds of authorised persons who are managers of, or have an
interest in, the licensable body,
(b)
the proportion of persons who are managers of, or have an interest
in, the licensable body who are authorised persons or authorised
persons of a particular kind,
5
(c)
the kinds of non-authorised persons who are managers of, or have an
interest in, the licensable body,
(d)
the proportion of persons who are managers of, or have an interest
in, the licensable body who are non-authorised persons or non-
authorised persons of a particular kind, and
10
(e)
the kinds of non-authorised persons who have an indirect interest in
the licensable body.
      (3)
In sub-paragraph (2)—
(a)
“authorised person” means a person who is an authorised person in
relation to any activity which is a reserved legal activity, and
15
(b)
authorised persons are of different kinds if they are authorised to
carry on such activities by different approved regulators.
Schedule 13
Section 89

Ownership of licensed bodies
Part 1
20
Introductory
Restricted interests subject to approval
1     (1)
The holding by a non-authorised person of a restricted interest in a licensed
body is subject to the approval of the relevant licensing authority in
accordance with the provisions of this Schedule.
25
      (2)
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) the
holding by a non-authorised person of a restricted interest in the body
without the approval of the relevant licensing authority does not make it
unlawful for the business of the partnership to be carried on, or for the
30
partners to carry it on in partnership.
Restricted interest
2     (1)
“Restricted interest” means each of the following—
(a)
a material interest;
(b)
if licensing rules are made by the relevant licensing authority under
35
sub-paragraph (2), a controlled interest.
      (2)
Licensing rules may specify that a controlled interest is a restricted interest
for the purposes of this Schedule.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
193

Material interest
3     (1)
For the purposes of this Part of this Act, a person holds a material interest in
a body (“B”) if the person—
(a)
holds at least 10% of the shares in B,
(b)
is able to exercise significant influence over the management of B by
5
virtue of the person’s shareholding in B,
(c)
holds at least 10% of the shares in a parent undertaking (“P”) of B,
(d)
is able to exercise significant influence over the management of P by
virtue of the person’s shareholding in P,
(e)
is entitled to exercise, or control the exercise of, voting power in B
10
which, if it consists of voting rights, constitutes at least 10% of the
voting rights in B,
(f)
is able to exercise significant influence over the management of B by
virtue of the person’s entitlement to exercise, or control the exercise
of, voting rights in B,
15
(g)
is entitled to exercise, or control the exercise of, voting power in P
which, if it consists of voting rights, constitutes at least 10% of the
voting rights in P,
(h)
is able to exercise significant influence over the management of P by
virtue of the person’s entitlement to exercise, or control the exercise
20
of, voting rights in P.
      (2)
Licensing rules made by the relevant licensing authority may provide—
(a)
that the references in sub-paragraph (1) to 10% are to have effect as
references to such lesser percentage as may be specified in the rules;
(b)
that in relation to a partnership, for the purposes of this Part a person
25
has a material interest in the partnership if he is a partner (whether
or not the person has a material interest by virtue of sub-paragraph
(1)).
      (3)
For the purposes of sub-paragraph (1) “the person” means—
(a)
the person,
30
(b)
any of the person’s associates, or
(c)
the person and any of the person’s associates taken together.
      (4)
For the purposes of this Schedule, material interests held by virtue of
different paragraphs of sub-paragraph (1) are restricted interests of different
kinds.
35
Controlled interest
4     (1)
For the purposes of this Schedule, a person holds a controlled interest in a
body (“B”) if the person—
(a)
holds at least x% of the shares in B,
(b)
holds at least x% of the shares in a parent undertaking (“P”) of B,
40
(c)
is entitled to exercise, or control the exercise of, at least x% of the
voting rights in B, or
(d)
is entitled to exercise, or control the exercise of, at least x% of the
voting rights in P.
      (2)
For the purposes of sub-paragraph (1) “the person” means—
45
(a)
the person,