Legal Services Bill [HL]

House of Lords

Session 2006 - 07
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Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
180

(b)
the manager or employee concerned was disqualified as a result of
breach of a duty within section 97(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
5
(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.
10
     (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).
25
Licensing rules may make provision about other circumstances in which the
licensing authority may exercise its power under section 99 to suspend or
15
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
licence, or to end the suspension of a licence, under section 99.
      (2)
They must make provision for review by the licensing authority of a decision
20
by the licensing authority to suspend or revoke a licence.
Schedule 12
Section 82

Entitlement to make an application for a licence to the Board
Application to Board
1     (1)
A licensable body may apply to the Board for a decision that the body is
25
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
grounds specified in this paragraph.
      (3)
The first ground is that—
30
(a)
there is no competent licensing authority, and
(b)
there is no potentially competent licensing authority.
      (4)
The second ground is that—
(a)
each competent licensing authority has determined that it does not
have suitable regulatory arrangements,
35
(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 in their regulatory arrangements, each of those
authorities has determined that it will not have suitable regulatory
arrangements if the application is granted, and
40

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
181

(c)
each potentially competent licensing authority has determined that
it will not have suitable regulatory arrangements if it becomes a
competent licensing authority.
      (5)
The third ground applies only in relation to a licensable body within sub-
paragraph (6), and is that—
5
(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
terms which are appropriate to that body.
      (6)
The licensable bodies within this sub-paragraph are—
10
(a)
a not for profit body;
(b)
a community interest company;
(c)
a trade union;
(d)
if an order under section 104(1)(e) so provides in relation to a
description of body prescribed under that section, a body of that
15
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
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
20
authority.
      (2)
The decision period is—
(a)
in relation to an application on the first ground, the period of 14 days
beginning with the day on which the application is made,
(b)
in relation to an application on the second ground, the period of 28
25
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.
      (3)
The Board must give a notice to the licensable body—
(a)
stating its decision, and
30
(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.
      (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
35
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.
Licensing authority’s duty to make relevant determinations
3     (1)
A licensable body may apply to each competent licensing authority for—
40
(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
mentioned in paragraph 1(4)(b) and if it has, a determination as to

Legal Services Bill [HL]
Schedule 12 — Entitlement to make an application for a licence to the Board
182

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
arrangements in place if it becomes a competent licensing authority.
5
      (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.
      (4)
The authority may specify only information which it reasonably requires for
10
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—
(a)
the decision period, or
15
(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
(2), is the period of 28 days beginning with the day on which the application
20
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
approved regulator.
25
“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.
“Potentially competent licensing authority”
30
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 Secretary of State make a relevant
designation order, and whose application has not been determined,
35
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 Secretary of State.
      (2)
A relevant designation order is an order—
40
(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.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
183

“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
5
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
10
services.
      (2)
The matters are—
(a)
the kinds of authorised persons who are managers of, or have an
interest in shares in, the licensable body,
(b)
the proportion of persons who are managers of, or have an interest
15
in shares in, the licensable body who are authorised persons or
authorised persons of a particular kind,
(c)
the kinds of non-authorised persons who are managers of, or have an
interest in shares in, the licensable body, and
(d)
the proportion of persons who are managers of, or have an interest
20
in shares in, the licensable body who are non-authorised persons or
non-authorised persons of a particular kind.
      (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
25
(b)
authorised persons are of different kinds if they are authorised to
carry on such activities by different approved regulators.
Schedule 13
Section 87

Ownership of licensed bodies
Part 1
30
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.
35
      (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
40
partners to carry it on in partnership.

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
184

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
sub-paragraph (2), a controlled interest.
5
      (2)
Licensing rules may specify that a controlled interests is a restricted interest
for the purposes of this Schedule.
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—
10
(a)
has an interest in at least 10% of the shares in B,
(b)
is able to exercise significant influence over the management of B by
virtue of the person’s interest in shares in B,
(c)
has an interest in at least 10% of the shares in a parent undertaking
(“P”) of B,
15
(d)
is able to exercise significant influence over the management of P by
virtue of the person’s interest in shares in P,
(e)
is entitled to exercise, or control the exercise of, at least 10% of the
voting power in B,
(f)
is able to exercise significant influence over the management of B by
20
virtue of the person’s voting power in B,
(g)
is entitled to exercise, or control the exercise of, at least 10% of the
voting power in P, or
(h)
is able to exercise significant influence over the management of P by
virtue of the person’s voting power in P.
25
      (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
has a material interest in the partnership if he is a partner (whether
30
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,
(b)
any of the person’s associates, or
35
(c)
the person and any of his 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.
Controlled interest
40
4     (1)
For the purposes of this Schedule, a person holds a controlled interest in a
body (“B”) if the person—
(a)
has an interest in at least x% of the shares in B,
(b)
has an interest in at least x% of the shares in a parent undertaking
(“P”) of B,
45

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
185

(c)
is entitled to exercise, or control the exercise of, at least x% of the
voting power in B, or
(d)
is entitled to exercise, or control the exercise of, at least x% of the
voting power in P.
      (2)
For the purposes of sub-paragraph (1) “the person” means—
5
(a)
the person,
(b)
any of the person’s associates, or
(c)
the person and any of his 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
10
2(2).
      (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—
15
(a)
10%, or
(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-
20
paragraph (1) are restricted interests of different kinds;
(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
25
5     (1)
For the purposes of this Schedule “associate”, in relation to a person (“A”)
and—
(a)
an interest in the shares of a body (“S”), or
(b)
an entitlement to exercise or control the exercise of voting power in
a body (“V”),
30

means a person listed in sub-paragraph (2).
      (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
35
possession (in Scotland a life interest),
(d)
an undertaking of which A is a director,
(e)
an employee or partner of A,
(f)
if A is an undertaking—
(i)
a director of A,
40
(ii)
a subsidiary undertaking of A, or
(iii)
a director or employee of such a subsidiary undertaking,
(g)
if A has with any other person an agreement or arrangement with
respect to the acquisition, holding or disposal of shares or other
interests in S or V, that other person, or
45

Legal Services Bill [HL]
Schedule 13 — Ownership of licensed bodies
Part 1 — Introductory
186

(h)
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.
      (3)
In sub-paragraph (2)(c), “settlement” means any disposition or arrangement
under which property is held on trust (or subject to a comparable
5
obligation).
      (4)
For the purposes of this Schedule—
“parent undertaking” and “subsidiary undertaking” have the same
meaning as in the Financial Services and Markets Act 2000 (c. 8) (see
section 420 of that Act);
10
“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
the overall policy of the body or alter the terms of its constitution.
The approval requirements
15
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
regulatory objectives,
(b)
the person’s holding of that interest does not compromise
20
compliance with the duties imposed by section 169 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.
      (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
25
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
to—
(a)
the person’s probity and financial position,
30
(b)
whether the person is disqualified as mentioned in section 98(1), or
included in the list kept by the Board under paragraph 52,
(c)
the person’s associates, and
(d)
any other matter which may be specified in licensing rules.
      (4)
Licensing rules must make provision about the procedures that will be
35
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
7     (1)
This paragraph applies if a person (“P”) holds a kind of restricted interest in
a body (“B”) by virtue of—
40
(a)
an interest in 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
percentage of the voting power in B or a parent undertaking of B.