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 1 — Introductory
194

(b)
any of the person’s associates, or
(c)
the person and any of the person’s associates taken together.
      (3)
In sub-paragraph (1), “x” means such percentage as may be specified in
licensing rules made by the relevant licensing authority under paragraph
2(2).
5
      (4)
Licensing rules made under paragraph 2(2) may specify more than one
percentage.
      (5)
Any percentage specified by licensing rules made under paragraph 2(2)
must be greater than—
(a)
10%, or
10
(b)
if the relevant licensing authority makes licensing rules under
paragraph 3(2)(a), the percentage specified in those rules.
      (6)
For the purposes of this Schedule—
(a)
controlled interests held by virtue of different paragraphs of sub-
paragraph (1) are restricted interests of different kinds;
15
(b)
if licensing rules made under paragraph 2(2) specify more than one
percentage, controlled interests held by virtue of each of those
percentages are restricted interests of different kinds.
Associates, parent undertakings and voting power
5     (1)
For the purposes of this Schedule “associate”, in relation to a person (“A”)
20
and—
(a)
a shareholding in a body (“S”), or
(b)
an entitlement to exercise or control the exercise of voting power in
a body (“V”),

means a person listed in sub-paragraph (2).
25
      (2)
The persons are—
(a)
the spouse or civil partner of A,
(b)
a child or stepchild of A (if under 18),
(c)
the trustee of any settlement under which A has a life interest in
possession (in Scotland a life interest),
30
(d)
an undertaking of which A is a director,
(e)
an employee of A,
(f)
a partner of A (except, where S or V is a partnership in which A is a
partner, another partner in S or V),
(g)
if A is an undertaking—
35
(i)
a director of A,
(ii)
a subsidiary undertaking of A, or
(iii)
a director or employee of such a subsidiary undertaking,
(h)
if A has with any other person an agreement or arrangement with
respect to the acquisition, holding or disposal of shares or other
40
interests in S or V (whether or not they are interests within the
meaning of section 72(3)), that other person, or
(i)
if A has with any other person an agreement or arrangement under
which they undertake to act together in exercising their voting power
in relation to S or V, that person.
45

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
195

      (3)
In sub-paragraph (2)(c), “settlement” means any disposition or arrangement
under which property is held on trust (or subject to a comparable
obligation).
      (4)
For the purposes of this Schedule—
“parent undertaking” and “subsidiary undertaking” have the same
5
meaning as in the Financial Services and Markets Act 2000 (c. 8) (see
section 420 of that Act);
“voting power”, in relation to a body which does not have general
meetings at which matters are decided by the exercise of voting
rights, means the right under the constitution of the body to direct
10
the overall policy of the body or alter the terms of its constitution.
The approval requirements
6     (1)
For the purposes of this Schedule, the approval requirements are met in
relation to a person’s holding of a restricted interest if—
(a)
the person’s holding of that interest does not compromise the
15
regulatory objectives,
(b)
the person’s holding of that interest does not compromise
compliance with the duties imposed by section 176 by the licensed
body or persons to whom sub-paragraph (2) applies, and
(c)
the person is otherwise a fit and proper person to hold that interest.
20
      (2)
This sub-paragraph applies to any employee or manager of the licensed
body who is an authorised person in relation to an activity which is a
reserved legal activity.
      (3)
In determining whether it is satisfied of the matters mentioned in sub-
paragraph (1)(a) to (c), the licensing authority must in particular have regard
25
to—
(a)
the person’s probity and financial position,
(b)
whether the person is disqualified as mentioned in section 100(1), or
included in the list kept by the Board under paragraph 51,
(c)
the person’s associates, and
30
(d)
any other matter which may be specified in licensing rules.
      (4)
Licensing rules must make provision about the procedures that will be
applied by the licensing authority when determining whether it is satisfied
of the matters mentioned in sub-paragraph (1)(a) to (c).
Approval of multiple restricted interests
35
7     (1)
This paragraph applies if a person (“P”) holds a kind of restricted interest in
a body (“B”) by virtue of—
(a)
holding a particular percentage of the shares in B or a parent
undertaking of B, or
(b)
an entitlement to exercise, or control the exercise of, a particular
40
percentage of the voting rights in B or a parent undertaking of B.
      (2)
If the relevant licensing authority approves P’s holding of that interest, it is
to be treated as also approving P’s holding of any lesser restricted interest in
B held by P.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 2 — Approval of restricted interests on application for licence
196

      (3)
A lesser restricted interest is a kind of restricted interest held by P by virtue
of—
(a)
holding a smaller percentage of the shares mentioned in sub-
paragraph (1)(a), or
(b)
an entitlement to exercise, or control the exercise of, a smaller
5
percentage of the voting rights mentioned in sub-paragraph (1)(b).
Board’s power to prescribe rules
8
In this Schedule “prescribed” means prescribed by rules made by the Board
for the purposes of this Schedule.
Lord Chancellor’s power to modify
10
9
The Lord Chancellor may, on the recommendation of the Board, by order
modify—
(a)
paragraph 3 (material interest);
(b)
paragraphs 4(2), 5, 6(3)(c), 38(3), 41(3) and 42(3) (associates).
Part 2
15
Approval of restricted interests on application for licence
Requirement to identify non-authorised persons
10    (1)
Where a body applies to a licensing authority for a licence, it must identify
in its application—
(a)
any non-authorised person who holds a restricted interest in the
20
body, or whom the body expects to hold such an interest when the
licence is issued, and
(b)
the kind of restricted interest held, or expected to be held, by that
person.
      (2)
If, before the licence is issued, there is any change in—
25
(a)
the identity of the non-authorised persons within sub-paragraph
(1)(a), or
(b)
the kind of restricted interest held, or expected to be held, by a
person identified to the licensing authority under that sub-
paragraph,
30

the applicant must inform the relevant licensing authority within such
period as may be specified by order made by the Lord Chancellor on the
recommendation of the Board.
11    (1)
It is an offence for a person to fail to comply with a requirement imposed on
the person by paragraph 10.
35
      (2)
A person who is guilty of an offence under sub-paragraph (1) is liable on
summary conviction to a fine not exceeding level 5 on the standard scale.
      (3)
It is a defence for a person charged with an offence under sub-paragraph (1)
to show that at the time of the alleged offence the person had no knowledge
of the facts by virtue of which the duty to notify arose.
40
12    (1)
This paragraph applies if a person under a duty to notify imposed by
paragraph 10—

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 2 — Approval of restricted interests on application for licence
197

(a)
had no knowledge of the facts by virtue of which that duty arose, but
(b)
subsequently becomes aware of those facts.
      (2)
The person must give 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.
5
      (3)
A person who fails to comply with the duty to notify imposed by sub-
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.
Requirement to notify non-authorised persons
10
13    (1)
Where an applicant for a licence identifies a non-authorised person to a
licensing authority in accordance with paragraph 10 or 12, it must give that
person a notice—
(a)
stating that it has applied for a licence and identified the person to
the licensing authority in accordance with paragraph 10 or 12, and
15
(b)
explaining the effect of paragraph 14.
      (2)
It is an offence for a person to fail to comply with a requirement imposed on
it by sub-paragraph (1).
      (3)
A person who is guilty of an offence under sub-paragraph (2) is liable on
summary conviction to a fine not exceeding level 5 on the standard scale.
20
Licensing authority’s power to require information
14    (1)
A licensing authority may require a non-authorised person identified to it in
accordance with paragraph 10 or 12 to provide it with such documents and
information as it may require.
      (2)
It is an offence for a person who is required to provide information or
25
documents under sub-paragraph (1) knowingly to provide false or
misleading information or documents.
      (3)
A person who is guilty of an offence under sub-paragraph (2) is liable—
(a)
on summary conviction, to a fine not exceeding the statutory
maximum, and
30
(b)
on conviction on indictment, to a term of imprisonment not
exceeding 2 years or a fine (or both).
Licence may not be granted unless non-authorised persons approved
15    (1)
This paragraph applies where an applicant for a licence (“the applicant”)
gives the licensing authority notification under paragraph 10 or 12 in
35
relation to one or more non-authorised persons.
      (2)
The licensing authority may not grant the application for a licence unless, in
relation to each non-authorised person in respect of which notification is
given (“the investor”), it approves the investor’s holding of the restricted
interest to which the notification relates (“the notified interest”).
40
      (3)
Sub-paragraph (2) does not apply in relation to a non-authorised person
who does not hold the notified interest when the licence is issued.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 2 — Approval of restricted interests on application for licence
198

      (4)
In this Part of this Schedule, “the applicant”, “the investor” and “the notified
interest” are to be construed in accordance with this paragraph.
Unconditional approval of notified interest
16    (1)
If the licensing authority is satisfied that the approval requirements are met
in relation to the investor’s holding of the notified interest, it must approve
5
the investor’s holding of that interest without conditions.
      (2)
If the licensing authority approves the investor’s holding of the notified
interest without conditions, it must notify the investor and the applicant of
its approval as soon as reasonably practicable.
Conditional approval of notified interest
10
17    (1)
If the licensing authority is not satisfied that the approval requirements are
met in relation to the investor’s holding of the notified interest, it may
approve the investor’s holding of the notified interest subject to conditions.
      (2)
It may do so only if it considers that, if the conditions are complied with, it
will be appropriate for the investor to hold the notified interest without the
15
approval requirements being met.
      (3)
If the licensing authority proposes to approve the investor’s holding of the
notified interest subject to conditions it must give the investor and the
applicant a warning notice.
      (4)
The warning notice must—
20
(a)
specify the nature of the conditions proposed and the reasons for
their imposition, and
(b)
state that representations may be made to the licensing authority
within the prescribed period.
      (5)
The licensing authority must consider any representations made within the
25
prescribed period.
      (6)
If the licensing authority approves the investor’s holding of the notified
interest subject to conditions, it must notify the investor and the applicant of
its approval as soon as reasonably practicable.
      (7)
The notice must—
30
(a)
specify the reasons for the imposition of the conditions, and
(b)
explain the effect of Part 5 of this Schedule.
18    (1)
The investor and the applicant may before the end of the prescribed period
appeal to the relevant appellate body against the imposition of any or all of
the conditions.
35
      (2)
The relevant appellate body may dismiss the appeal, or allow the appeal
and—
(a)
order the licensing authority to approve the investor’s holding of the
notified interest without conditions, or subject to such conditions as
may be specified in the order, or
40
(b)
remit the matter to the licensing authority.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 2 — Approval of restricted interests on application for licence
199

      (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)
If the investor’s holding of the notified interest is subject to conditions as a
5
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 17.
Objection to notified interest
19    (1)
If the licensing authority is not satisfied that the approval requirements are
10
met in relation to the investor’s holding of the notified interest, it may object
to the investor’s holding of that interest.
      (2)
If the licensing authority proposes to object to the investor’s holding of the
notified interest, it must give the investor and the applicant a warning
notice.
15
      (3)
The warning notice must—
(a)
specify the reasons for the proposed objection, and
(b)
state that representations may be made to the licensing authority
within the prescribed period.
      (4)
The licensing authority must consider any representations made within the
20
prescribed period.
      (5)
If the licensing authority objects to the investor’s holding of the notified
interest, it must notify the investor and the applicant of its objection as soon
as reasonably practicable.
      (6)
The notice must—
25
(a)
specify the reasons for the objection, and
(b)
explain the effect of Part 5 of this Schedule.
20    (1)
The investor and the applicant may before the end of the prescribed period
appeal to the relevant appellate body against the objection.
      (2)
The relevant appellate body may dismiss the appeal, or allow the appeal
30
and—
(a)
order the licensing authority to approve the investor’s holding of the
notified interest without conditions, or subject to such conditions as
may be specified in the order, or
(b)
remit the matter to the licensing authority.
35
      (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
appellate body, but only with the permission of the High Court.
      (4)
The High Court may make such order as it thinks fit.
      (5)
If the investor’s holding of the notified interest is subject to conditions as a
40
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 17.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
200

Part 3
Approval of restricted interests after licence is issued
Powers of licensing authority in relation to change of interests
Continuing notification requirements
21    (1)
This paragraph applies where a non-authorised person (“the investor”)—
5
(a)
proposes to take a step which would result in the investor acquiring
a restricted interest in a licensed body (or, if the investor already has
one or more kinds of restricted interest, acquiring an additional kind
of restricted interest), or
(b)
acquires such an interest in a licensed body without taking such a
10
step.
      (2)
In a case within sub-paragraph (1)(a) the investor must notify the licensed
body and the relevant licensing authority of the proposal.
      (3)
In a case within sub-paragraph (1)(b) the investor must notify the licensed
body and the relevant licensing authority of the acquisition within such
15
period, after the investor becomes aware of it, as may be specified by order
made by the Lord Chancellor on the recommendation of the Board.
      (4)
In this Part of this Schedule—
(a)
references to “the investor” are to be construed in accordance with
this paragraph, and
20
(b)
references to a notifiable interest are to the restricted interest which
the investor will have as a result of the step the investor proposes to
take (or has as a result of the acquisition which has taken place).
Offences in connection with paragraph 21
22    (1)
It is an offence for a person to fail to comply with a requirement imposed
25
by—
(a)
paragraph 21(2), or
(b)
paragraph 21(3).
      (2)
A person who is guilty of an offence under sub-paragraph (1) is liable on
summary conviction to a fine not exceeding level 5 on the standard scale.
30
      (3)
It is a defence for a person charged with an offence under sub-paragraph
(1)(a) to show that at the time of the alleged offence the person had no
knowledge of the facts by virtue of which the duty to notify arose.
23    (1)
This paragraph applies if a person under the duty to notify imposed by
paragraph 21(2)—
35
(a)
had no knowledge of the facts by virtue of which that duty arose, but
(b)
subsequently becomes aware of those facts.
      (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
40
recommendation of the Board.