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 3 — Approval of restricted interests after licence is issued
201

      (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.
24    (1)
It is an offence for a non-authorised person, who under paragraph 21(2) is
5
required to notify the licensed body and the relevant licensing authority of
a proposal to take a step, to take the step, unless the relevant licensing
authority has approved the investor’s holding of the notifiable interest
under paragraph 27 or 28.
      (2)
If paragraph 22(3) applies, the reference in sub-paragraph (1) to paragraph
10
21(2) is to be read as a reference to paragraph 23(2).
      (3)
A person who is guilty of an offence under sub-paragraph (1) is liable—
(a)
on summary conviction, to a fine not exceeding the statutory
maximum, and
(b)
on conviction on indictment, to a term of imprisonment not
15
exceeding 2 years or a fine (or both).
Duty of licensing authority following notification etc.
25    (1)
The relevant licensing authority must—
(a)
following receipt of a notification under paragraph 21(2) or (3) or
23(2), or
20
(b)
if the licensing authority becomes aware that an investor has failed
to comply with a notification requirement imposed by paragraph
21(2) or (3) or 23(2),

determine which of the steps in sub-paragraph (3) to take.
      (2)
The licensing authority must make the determination within such period as
25
may be prescribed.
      (3)
The steps are—
(a)
to approve the investor’s holding of the notifiable interest
unconditionally under paragraph 27,
(b)
to warn the investor under paragraph 28(3) that it proposes to
30
approve the investor’s holding of the notifiable interest subject to
conditions,
(c)
to approve under paragraph 28(4) the investor’s holding of the
notifiable interest subject to conditions,
(d)
to warn the investor under paragraph 31(2) that it proposes to object
35
to the investor’s holding of the notifiable interest, or
(e)
to object under paragraph 31(3) to the investor’s holding of the
notifiable interest.
Licensing authority’s power to require information
26    (1)
A licensing authority may require the investor to provide it with such
40
documents and information as it may require.
      (2)
It is an offence for a person who is required to provide information or
documents under sub-paragraph (1) knowingly to provide false or
misleading information or documents.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
202

      (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
(b)
on conviction on indictment, to a term of imprisonment not
exceeding 2 years or a fine (or both).
5
Unconditional approval of notifiable interest
27    (1)
If the licensing authority is satisfied that the approval requirements are met
in relation to the investor’s holding of the notifiable interest, it must approve
the investor’s holding of that interest without conditions.
      (2)
If the licensing authority approves the investor’s holding of the notifiable
10
interest without conditions, it must notify the investor and the licensed body
of its approval as soon as reasonably practicable.
Conditional approval of notifiable interest
28    (1)
If the licensing authority is not satisfied that the approval requirements are
met in relation to the investor’s holding of the notifiable interest, it may
15
approve the investor’s holding of that 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 notifiable interest without the
approval requirements being met.
      (3)
If the licensing authority proposes to approve the investor’s holding of the
20
notifiable interest subject to conditions it must give the investor and the
licensed body a warning notice.
      (4)
But the licensing authority may approve the investor’s holding of the
notifiable interest subject to conditions without giving a warning notice if it
considers it necessary or desirable to do so for the purpose of protecting any
25
of the regulatory objectives.
      (5)
The warning notice must—
(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
30
within the prescribed period.
      (6)
The licensing authority must consider any representations made within the
prescribed period.
      (7)
If the licensing authority approves the investor’s holding of the notifiable
interest subject to conditions, it must notify the investor and the licensed
35
body of its approval as soon as reasonably practicable.
      (8)
The notice must—
(a)
specify the reasons for the imposition of the conditions and (if the
investor already holds the notifiable interest) the time from which
they have effect, and
40
(b)
explain the effect of Part 5 of this Schedule.
29    (1)
The investor and the licensed body may before the end of the prescribed
period appeal to the relevant appellate body against the imposition of any
or all the conditions.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
203

      (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
notifiable interest without conditions, or subject to such conditions
as may be specified in the order, or
5
(b)
remit the matter to the licensing authority.
      (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.
10
      (5)
If the investor’s holding of the notifiable 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 28.
Duration of unconditional or conditional approval
15
30
In a case within paragraph 21(1)(a), the licensing authority’s approval under
paragraph 27 or 28 remains effective only if the investor acquires the
notifiable interest—
(a)
before the end of such period as may be specified in the notice under
paragraph 27(2) or 28(7), or
20
(b)
if no such period is specified, before the end of the period of one year
beginning with the date of that notice.
Objection to acquisition of notifiable interest
31    (1)
If the licensing authority is not satisfied that the approval requirements are
met in relation to the investor’s holding of the notifiable interest, it may
25
object to the investor’s holding of that interest.
      (2)
If the licensing authority proposes to object to the investor’s holding of the
notifiable interest, it must give the investor and the licensed body a warning
notice.
      (3)
But the licensing authority may object to the investor’s holding of the
30
notifiable interest without giving a warning notice if it considers it necessary
or desirable to do so for the purpose of protecting any of the regulatory
objectives.
      (4)
The warning notice must—
(a)
specify the reasons for the proposed objection, and
35
(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
prescribed period.
      (6)
If the licensing authority objects to the investor’s holding of the notifiable
40
interest, it must notify the investor and the licensed body of its objection as
soon as reasonably practicable.
      (7)
The notice must—
(a)
specify the reasons for the objection, and

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
204

(b)
explain the effect of Part 5 of this Schedule.
32    (1)
The investor and the licensed body 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
and—
5
(a)
order the licensing authority to approve the investor’s holding of the
notifiable interest without conditions, or subject to such conditions
as may be specified in the order, or
(b)
remit the matter to the licensing authority.
      (3)
A party to the appeal may before the end of the prescribed period appeal to
10
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 notifiable interest is subject to conditions as a
result of an order made on an appeal under this paragraph, for the purposes
15
of this Schedule the conditions are to be treated as having been imposed
under paragraph 28.
Powers of licensing authority where no change of interests
Imposition of conditions (or further conditions) on existing restricted interest
33    (1)
The relevant licensing authority may impose conditions (or further
20
conditions) on a person’s holding of a restricted interest in a licensed body
(or a restricted interest of a particular kind) if—
(a)
it is not satisfied that the approval requirements are met in relation
to the person’s holding of that interest, or
(b)
it is satisfied that a condition imposed under paragraph 17 or 28 or
25
this paragraph on the person’s holding of that interest has not been,
or is not being, complied with.
      (2)
The licensing authority may act under sub-paragraph (1) only—
(a)
if it considers that, if the conditions are complied with, it will be
appropriate for the investor to hold the restricted interest without the
30
approval requirements being met, and
(b)
before the end of such period (beginning with the time when the
licensing authority becomes aware of the matters in question) as may
be prescribed.
      (3)
If the licensing authority proposes to impose conditions (or further
35
conditions) on the person’s holding of the restricted interest, it must give the
person and the licensed body a warning notice.
      (4)
But the licensing authority may impose conditions (or further conditions) on
the person’s holding of the restricted interest without giving a warning
notice if it considers it necessary or desirable to do so for the purpose of
40
protecting any of the regulatory objectives.
      (5)
The warning notice must—
(a)
specify the nature of the conditions proposed and the reasons for
their imposition, and

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
205

(b)
state that representations may be made to the licensing authority
within the prescribed period.
      (6)
The licensing authority must consider any representations made within the
prescribed period.
      (7)
If the licensing authority imposes conditions (or further conditions) on the
5
person’s holding of the restricted interest, it must notify the person and the
licensed body as soon as reasonably practicable.
      (8)
The notice must—
(a)
specify the reasons for the imposition of the conditions, and the time
from which they are to take effect, and
10
(b)
explain the effect of Part 5 of this Schedule.
34    (1)
The person and the licensed body may before the end of the prescribed
period appeal to the relevant appellate body against any or all of the
conditions (or further conditions).
      (2)
The relevant appellate body may dismiss the appeal, or allow the appeal
15
and—
(a)
modify or quash the conditions imposed by the licensing authority
under paragraph 33, or
(b)
remit the matter to the licensing authority.
      (3)
A party to the appeal may before the end of the prescribed period appeal to
20
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 person’s holding of the restricted interest is subject to any conditions
as a result of an order made on an appeal under this paragraph, for the
25
purposes of this Schedule those conditions are to be treated as having been
imposed under paragraph 33.
Variation and cancellation of conditions
35    (1)
A person whose holding of a restricted interest in a licensed body is subject
to a condition imposed under paragraph 17, 28 or 33 may apply to the
30
relevant licensing authority—
(a)
for the condition to be varied, or
(b)
for the condition to be cancelled.
      (2)
The licensing authority may, on its own initiative, cancel a condition
imposed under one of those paragraphs.
35
      (3)
If the licensing authority varies or cancels a condition under this paragraph,
it must notify the person and the licensed body as soon as reasonably
practicable.
Objection to existing restricted interest
36    (1)
The relevant licensing authority may object to a person’s holding of a
40
restricted interest in a licensed body (or a restricted interest of a particular
kind) if—

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 3 — Approval of restricted interests after licence is issued
206

(a)
it is not satisfied that the approval requirements are met in relation
to the person’s holding of that interest, or
(b)
it is satisfied that a condition imposed under paragraph 17, 28 or 33
on the person’s holding of the interest has not been, or is not being,
complied with.
5
      (2)
The licensing authority may act under sub-paragraph (1) only before the end
of such period (beginning with the time when the licensing authority
becomes aware of the matters in question) as may be prescribed.
      (3)
If the licensing authority proposes to object to a person’s holding of the
restricted interest, it must give the person and the licensed body a warning
10
notice.
      (4)
But the licensing authority may object to the person’s holding of the
restricted interest without giving a warning notice if it considers it necessary
or desirable to do so for the purpose of protecting any of the regulatory
objectives.
15
      (5)
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.
      (6)
The licensing authority must consider any representations made within the
20
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.
      (8)
The notice must—
25
(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.
      (2)
The relevant appellate body may dismiss or allow the appeal.
30
      (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
(b)
remit the matter to the licensing authority.
35
      (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.
      (6)
If the person’s holding of the restricted 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 33.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 4 — Additional restrictions
207

Part 4
Additional restrictions
Power to impose share limit, voting limit etc
38    (1)
Licensing rules may provide that—
(a)
a non-authorised person may not have a shareholding in a licensed
5
body, or in a parent undertaking of a licensed body, which exceeds a
limit specified in the rules (“the share limit”);
(b)
a non-authorised person may not have an entitlement to exercise, or
control the exercise of, voting rights in a licensable body, or a parent
undertaking of a licensable body, which exceeds a limit specified in
10
the rules (“the voting limit”);
(c)
the total proportion of shares in a licensed body, or a parent
undertaking of a licensed body, held by non-authorised persons may
not exceed a limit specified in the rules;
(d)
the total proportion of voting rights in a licensed body, or a parent
15
undertaking of a licensed body, which non-authorised persons are
entitled to exercise or control the exercise of, may not exceed a limit
specified in the rules.
      (2)
Rules made under any paragraph of sub-paragraph (1) in relation to a
licensed body and a parent undertaking may specify different limits in
20
relation to the licensed body and the parent undertaking.
      (3)
Licensing rules made under sub-paragraph (1)(a) or (b) may provide that
references in those rules to a person, in relation to a person’s shareholding
or entitlement to exercise or control the exercise of voting rights, are to—
(a)
the person,
25
(b)
any of the person’s associates, or
(c)
the person and any of the person’s associates taken together.
      (4)
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
30
unlawful for the business of the partnership to be carried on, or for the
partners to carry it on in partnership.
Obligation to notify where share limit or voting limit exceeded
39    (1)
This paragraph applies in relation to a licensed body, or a parent
undertaking of a licensed body, if licensing rules made by the relevant
35
licensing authority make the provision mentioned in paragraph 38(1)(a) or
(b) in relation to the body.
      (2)
Any non-authorised person who acquires—
(a)
a shareholding in the body which exceeds the share limit, or
(b)
an entitlement to exercise, or control the exercise of, voting rights in
40
the body which exceeds the voting limit,

must notify the body (and, if the body is a parent undertaking of a licensed
body, 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.
45