Legal Services Act 2007 (c. 29)

(The document as of February, 2008)

-- Back --

Page 19

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37

(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

(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

(b) authorised persons are of different kinds if they are authorised to carry on such activities by different approved regulators.

Section 89

SCHEDULE 13 Ownership of licensed bodies

Part 1 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.

(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 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 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.

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 virtue of the person's shareholding in 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 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,

(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 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 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,

(b) any of the person's associates, or

(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

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,

(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--

(a) the person,

(b) any of the person's associates, or

(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).

(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

(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;

(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") 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).

(2) The persons are--

(a) the spouse or civil partner of A,

(b) a child or stepchild of A (if under 18),

(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--

(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 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.

(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 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 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 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

(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 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,

(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

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 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.

(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 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

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 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 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--

(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,

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.

(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.

12 (1) This paragraph applies if a person under a duty to notify imposed by paragraph 10--

(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.

(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

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

(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.

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 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

(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 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").

(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.

(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 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

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 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--

(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 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--

(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.

(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

(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 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 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 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.

(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 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--

(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 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.

(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.

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")--

(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 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 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

(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 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.

(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)--

(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 recommendation 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.

24 (1) It is an offence for a non-authorised person, who under paragraph 21(2) is 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 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 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

(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 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 approve 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 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 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.

(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).

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 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 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 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 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 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 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

(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.

(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

(b) remit the matter to the licensing authority.

(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 of this Schedule the conditions are to be treated as having been imposed under paragraph 28.

Duration of unconditional or conditional approval

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

-- Back --

Stat