Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 5 — Enforcement
208

      (3)
It is an offence for a person to fail to comply with a requirement imposed by
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)
5
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    (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
10
(b)
subsequently becomes aware of those facts.
      (2)
The person must give the body (and, if the body is a parent undertaking of
a licensed body, 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
15
of the Board.
      (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.
20
Part 5
Enforcement
Divestiture
The divestiture condition
41    (1)
The divestiture condition is satisfied in relation to a non-authorised person
25
and a licensed body if—
(a)
the person holds a restricted interest in the licensed body in the
circumstances mentioned in sub-paragraph (2), and
(b)
the person holds that interest, in whole or in part, by virtue of the
person’s shareholding in a body corporate with a share capital (in
30
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
constitutes an offence under paragraph 24(1) (whether or not the
person is charged with or convicted of an offence under that
35
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
paragraph 31 or 36.
      (3)
In sub-paragraph (1)(b), references to a person’s shareholding are to be read
40
in accordance with paragraph 3(3) or 4(2) (as the case may be).

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

42    (1)
If the relevant licensing rules make the provision mentioned in paragraph
38(1)(a) or (b), the divestiture condition is also satisfied in relation to a non-
authorised person and a licensed body if—
(a)
the person’s shareholding in the body, or a parent undertaking of the
body, exceeds the share limit, and the body or parent undertaking (as
5
the case may be) is a body corporate with a share capital, or
(b)
the person’s entitlement to exercise or control the exercise of voting
rights in the body, or a parent undertaking of the body, exceeds the
voting limit by virtue of the person holding shares in a body
corporate with a share capital.
10
      (2)
In this Part of this Schedule, “excess shares” means
(a)
in a case within sub-paragraph (1)(a), the number of shares by which
the person’s shareholding exceeds the share limit, and
(b)
in a case within sub-paragraph (1)(b), the number of shares held by
the person in excess of the number of shares the person could hold
15
without the person’s entitlement to exercise, or control the exercise
of, voting rights exceeding the voting limit.
      (3)
References in this paragraph to a person’s shareholding (or holding of
shares) or entitlement are to be read in accordance with any applicable
licensing rules made under paragraph 38(3).
20
Application for divestiture
43    (1)
If the divestiture condition is satisfied in relation to a non-authorised person
and a licensed body, the licensing authority may give the person a restriction
notice under paragraph 44 and apply to the High Court for an order under
paragraph 45.
25
      (2)
The licensing authority may not make an application to the High Court for
an order under paragraph 45 unless—
(a)
it has notified the person that it intends to do so if the divestiture
condition is satisfied in relation to the person and the body at the end
of the relevant period, and
30
(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.
Restriction notice
44    (1)
A restriction notice is a notice directing that such of the relevant shares or
35
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—
(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
40
issued with them, is void;
(b)
no voting rights are to be exercisable in respect of the shares;
(c)
no further shares are to be issued in right of them or in pursuance of
any offer made to their holder;

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

(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.
      (3)
A copy of the restriction notice must be given to the body to whose shares it
relates.
5
      (4)
A restriction notice ceases to have effect—
(a)
in accordance with an order of the High Court under paragraph
45(4);
(b)
if no application has been made to the High Court for an order under
paragraph 45 before the end of such period as may be prescribed, at
10
the end of that period;
(c)
if the licensed body ceases to be licensed by the licensing authority.
Divestiture by High Court
45    (1)
If the divestiture condition is satisfied by virtue of paragraph 41 the High
Court may, on the application of the licensing authority, order the sale of the
15
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
holding—
(a)
a restricted interest in the licensed body, or
20
(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 41(2).
      (3)
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
25
excess shares.
      (4)
If shares are for the time being subject to any restriction under paragraph 44,
the court may order that they are to cease to be subject to that restriction.
      (5)
If the divestiture condition is satisfied by virtue of paragraph 41(2)(b) or (c),
no order may be made under sub-paragraph (1) or (4)—
30
(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
withdrawn.
      (6)
If an order has been made under sub-paragraph (1) or (3) the court may, on
35
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
proceeds of sale, less the costs of sale, must be paid into court for the benefit
of the persons beneficially interested in them.
40
      (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
211

Conditions
Enforcement of conditions
46    (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
47    (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 43 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
212

48    (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 51.
      (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 or voting limit breached
49    (1)
This paragraph applies if the relevant licensing rules make the provision
mentioned in paragraph 38(1)(a) or (b).
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 a non-authorised person
acquires—
(a)
a shareholding in a licensed body or parent undertaking of a licensed
body which exceeds the share limit, or
25
(b)
an entitlement to exercise, or control the exercise of, voting rights in
a licensed body or parent undertaking of a licensed body which
exceeds the voting limit.
      (3)
If the licensing authority proposes to make a notification under sub-
paragraph (2), it must give the person and the licensed body a warning
30
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
within the prescribed period.
35
      (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
and a notice stating the reasons for the notification.
40
      (7)
If the share limit or voting limit is breached in relation to a parent
undertaking of a licensed body, references in sub-paragraphs (3) and (6) to
the licensed body include the parent undertaking.

Legal Services Bill [HL]
Schedule 14 — Licensing authority’s powers of intervention
213

50    (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—
(a)
dismiss the appeal, or
5
(b)
allow the appeal and order the person’s name to be removed from
the list kept by the Board under paragraph 51.
      (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.
10
      (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
under this paragraph, and give the person concerned and the licensed body
a copy of the notification.
      (6)
If the share limit or voting limit is breached in relation to a parent
15
undertaking of a licensed body, references in sub-paragraphs (1) and (5) to
the licensed body include the parent undertaking.
Board’s list of persons subject to objections and conditions
51    (1)
The Board must keep a list of the persons in respect of which it receives a
notification under paragraph 47(1) or 49(2).
20
      (2)
The list must record—
(a)
in relation to a person notified to the Board under paragraph 47(1),
the information included in the notification by virtue of paragraph
47(2) and any notification under paragraph 47(3), and
(b)
in relation to any person included in the list, the information
25
included in any notification relating to that person under paragraph
48.
      (3)
If the Board receives a notification under paragraph 47(4) or (5), 48(3) or (4)
or 50(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
30
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
35
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
40
renewed or replaced by the relevant licensing authority).

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

      (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 relevant insolvency event has occurred in relation to the
licensed body;
5
(c)
that the licensing authority has reason to suspect dishonesty on the
part of any manager or employee of the licensed body in connection
with—
(i)
that body’s business,
(ii)
any trust of which that body is or was a trustee,
10
(iii)
any trust of which the manager or employee of the body is or
was a trustee in that person’s capacity as such a manager or
employee, or
(iv)
the business of another body in which the manager or
employee is or was a manager or employee, or the practice
15
(or former practice) of the manager or employee;
(d)
that the licensing authority is satisfied that there has been undue
delay—
(i)
on the part of the licensed body in connection with any
matter in which it is or was acting for a client or with any trust
20
of which it is or was a trustee, or
(ii)
on the part of a person who is or was a manager or employee
of the licensed body in connection with any trust of which
that person is or was a trustee in that person’s capacity as
such a manager or employee,
25

and the notice conditions are satisfied;
(e)
that the licensing authority is satisfied that it is necessary to exercise
the powers conferred by this Schedule (or any of them) in relation to
a licensed body to protect—
(i)
the interests of clients (or former or potential clients) of the
30
licensed body,
(ii)
the interests of the beneficiaries of any trust of which the
licensed body is or was a trustee, or
(iii)
the interests of the beneficiaries of any trust of which a person
who is or was a manager or employee of the licensed body is
35
or was a trustee in that person’s capacity as such a manager
or employee.
      (3)
For the purposes of sub-paragraph (2) a relevant insolvency event occurs in
relation to a licensed body if—
(a)
a resolution for a voluntary winding-up of the body is passed
40
without a declaration of solvency under section 89 of the Insolvency
Act 1986 (c. 45);
(b)
the body enters administration within the meaning of paragraph
1(2)(b) of Schedule B1 to that Act;
(c)
an administrative receiver within the meaning of section 251 of that
45
Act is appointed;
(d)
a meeting of creditors is held in relation to the body under section 95
of that Act (creditors’ meeting which has the effect of converting a
members’ voluntary winding up into a creditors’ voluntary winding
up);
50
(e)
an order for the winding up of the body is made.