Clause 72
Legal Services Bill [Lords]
8:30 pm
Bridget Prentice (Parliamentary Under-Secretary, Ministry of Justice; Lewisham East, Labour)
I agree with you absolutely,Sir Nicholas. I shall be happy to stay here all night if necessary. Only a few of us remember the times when we sat through the night in Committee. Those were the days, and good fun was had by all.
This is a fearsome list of amendments, but they are relatively straightforward. They refine the ownership provisions in part 5 and schedules 16 and 17 to provide more clarity on how firms and companies with complex ownership structures will fit into the ABS or recognised body regimes, as well as on whether non-lawyer owners and managers will be subject to the fitness-to-own tests. They also contain a number of related and consequential changes to other provisions. They do not depart from existing policy on non-lawyer ownership, but they do provide essential refinements to ensure clarity in complex corporate structures.
The group contains amendments to the non-lawyer ownership and related provisions in part 5; to the ownership provisions in schedule 13, which contains the fitness-to-own test, and to the ownership and related regulatory provisions for recognised bodies in schedules 16 and 17 to ensure that there is no overlap with part 5.
The principal change to which the other amendments relate is the revised clause 72 proposed by amendment No. 111. The clause provides that a body will be a licensable body if it has any managers who are non-authorised persons, but it will now contain a refined ownership test that clarifies how the test will apply to complex corporate structures. Proposed subsections (1)(b) and (2A) provide that a body will be licensable if any non-authorised person holds shares in it or is entitled to control voting rights in it. As before, the concept of shares is wide enough to cover notonly companies but limited liability partnerships, partnerships and other unincorporated bodies. Proposed subsection (2) provides that a body shall be licensable if one of its managers, shareholders or persons with voting rights is itself a body and one or more non-authorised persons hold 10 per cent. or more of the shares or voting rights in that second-tier body.
The new formulation provides greater clarity and consumer protection than the existing clause 72 in relation to the many and varied types of structure that may be used to deliver legal services. In particular, it will ensure that loopholes do not arise because of complex structures, for example in bodies with multiple corporate tiers. A number of related and consequential amendments, including those to schedules 11 and 12, are necessary to reflect that change. That includes provisions that refer to or impose obligations on non-lawyer owners, such as the low-risk body provisions in clauses 106 and 108, and to the provisions in clause 90 setting out the duties of non-authorised persons. In addition, the definition of a “non-authorised person” in clause 111 is amended to ensure that the treatment of foreign lawyers and international legal services firms, particularly those with complex corporate structures, is consistent with the amendments to clause 72.
There are a number of related amendments to schedule 13, which deals specifically with the regulation of non-lawyer owners. Many of them reflect our changes to the concept of interest in a body and the distinction between voting rights and the wider concept of voting power, which is defined in paragraph 5 of the schedule.
The third main area of change is amendments to the terms of the ownership test for recognised bodies regulated by the Law Society and the Council for Licensed Conveyancers, as well as related regulatory provisions. The amendments to the definitions of terms such as “licensable body” and “shares” reflect the changes to clause 72. They maintain our policy that the categories of licensable bodies in part 5 and bodies that may be recognised by the Law Society and the CLC are mutually exclusive.
The amendments will create greater certainty and identify the boundaries between regulatory regimes for ABS firms and other authorised bodies. They will also provide greater clarity in setting out how and when the different provisions in the Bill regulating owners will apply to specific individuals and firms. On that basis, I recommend them to the Committee.