SRA Handbook

Formation and eligibility criteria for recognised bodies and licensed bodies

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Part 3: Formation and eligibility criteria for recognised bodies, recognised sole practices and licensed bodies

Rule 13: Eligibility criteria and fundamental requirements for recognised bodies and recognised sole practices

Recognised bodies

13.1

To be eligible to be a recognised body, a body must be a legal services body namely a partnership, company or LLP of which:

(a)

at least one manager is:

(i)

a solicitor with a current practising certificate, or

(ii)

an REL, or

(iii)

(in the case of a partnership or LLP) a body corporate which is a legally qualified body with at least one manager who is a solicitor with a current practising certificate or an REL; and

(b)

all of the managers and interest holders are lawyers and legally qualified bodies.

Services requirement for a recognised body or recognised sole practice

13.2

The business of a recognised body or recognised sole practice may consist only of the provision of:

(a)

professional services of the sort provided by individuals practising as solicitors and/or lawyers of other jurisdictions; and

(b)

professional services of the sort provided by notaries public, but only if a notary public is a manager or employee of a recognised body; and

(c)

the following services (whether or not they are also included in paragraph (a))

(i)

alternative dispute resolution;

(ii)

financial services;

(iii)

estate agency;

(iv)

management consultancy;

(v)

company secretarial services;

(vi)

other professional and specialist support services to business including human resources, recruitment, systems support, outsourcing, transcription and translating;

(vii)

acting as a parliamentary agent;

(viii)

practising as a lawyer of another jurisdiction;

(ix)

acting as a bailiff;

(x)

accountancy services;

(xi)

education and training activities; and

(xii)

authorship, journalism and publishing.

Recognised sole practices

13.3

A sole practitioner's practice is eligible to be a recognised sole practice if the sole practitioner:

(a)

is a solicitor or REL;

(b)

will be practising as a sole practitioner from an office in England and Wales; and

(c)

is not, and is not about to be made, subject to a condition on his or her practising certificate or registration."

Guidance notes

(i)

Although most organisations which involve non-lawyers as managers or interest holders must be licensed bodies, there is a limited exception under section 72(2) of the LSA which permits a small degree of non-lawyer involvement in recognised bodies. Where one or more bodies are involved in a firm as a manager or owner/interest holder, and in those bodies non-authorised persons have only a de minimis (less than 10%) control by way of voting rights, then the firm will remain a legal services body requiring recognition under the AJA. Where the control is 10% or more, the firm will be a licensable body.

(ii)

Rule 13.2 lists the services that can be carried out within a recognised body or a recognised sole practice: either solicitor services, notary services, services of a lawyer or as exceptions to these services under section 9(1A) of the Administration of Justice Act 1985. Professional services 'of the sort that can be carried out by solicitors' include any legal activity under the LSA. Nothing in Rule 13.2 affects any requirements that may be imposed by legislation or non SRA-regulation in relation to the listed activities. See also the SRA Property Selling Rules 2011 in relation to estate agency services.

Rule 14: Eligibility criteria and fundamental requirements for licensed bodies

14.1

To be eligible to be a licensed body, a body must comply with the lawyer manager requirement set out in Rule 14.2 below and be a "licensable body", as defined under section 72 of the LSA, and as set out in Rule 14.3 to 14.6 below.

14.2

At all times at least one manager of a licensed body must be an individual who is:

(a)

a solicitor with a current practising certificate;

(b)

an REL;

(c)

a lawyer of England and Wales and who is authorised by an approved regulator other than the SRA; or

(d)

registered with the BSB under regulation 17 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119).

14.3

A body ("B") is a licensable body if a non-authorised person:

(a)

is a manager of B, or

(b)

is an interest holder of B.

14.4

A body ("B") is also a licensable body if:

(a)

another body ("A") is a manager of B, or is an interest holder of B, and

(b)

non-authorised persons are entitled to exercise, or control the exercise of, at least 10% of the voting rights in A.

14.5

A body may be a licensable body by virtue of both 14.3 and 14.4.

14.6

For the purposes of this rule, a non-authorised person has an indirect interest in a licensable body if the body is a licensable body by virtue of 14.4 and the non-authorised person is entitled to exercise, or control the exercise of, voting rights in A.

Rule 15: Formation, registered office and practising address

15.1

An authorised body which is a partnership may be formed under the law of any country and may be a legal person.

15.2

An authorised body which is an LLP must be incorporated and registered in England and Wales, Scotland or Northern Ireland under the Limited Liability Partnerships Act 2000.

15.3

An authorised body which is a company must be:

(a)

incorporated and registered in England and Wales, Scotland or Northern Ireland under Parts 1 and 2 of the Companies Act 2006;

(b)

incorporated in an Establishment Directive state and registered as an overseas company under Part 34 of the Companies Act 2006; or

(c)

incorporated and registered in an Establishment Directive state as a societas Europaea.

15.4

An authorised body must have at least one practising address in England and Wales.

15.5

An authorised body must have its registered office at a practising address in England and Wales if the authorised body is registered in England and Wales:

(a)

under Parts 1 and 2 of the Companies Act 2006;

(b)

under the Limited Liability Partnerships Act 2000; or

(c)

as a societas Europaea.

Guidance note:

(i)

See also the reporting requirements relating to the practising address and registered addresses of your overseas practices set out in:

(a)

Rule 4.4 of the SRA Authorisation Rules;

(b)

Rule 18.2 of the SRA Practice Framework Rules; and

(c)

Rule 3.2 of the SRA Overseas Rules.

(ii)

See also the requirements relating to the practising address of a recognised sole practice in Rule 6 of the SRA Authorisation Rules.

Rule 16: Composition of a recognised body and a licensed body

16.1

Provided that the requirements for all recognised bodies and licensed bodies set out in Rule 13 or Rule 14, as appropriate, are met, a recognised body or an licensed body may have all or any of the following as a partner (if it is a partnership), a member (if it is an LLP), or a director, member or shareowner (if it is a company):

(a)

a lawyer of England and Wales (including a solicitor with a current practising certificate);

(b)

an REL;

(c)

an RFL;

(d)

an EEL;

(e)

in the case of a partnership or an LLP, a body corporate which is a legally qualified body;

(f)

in the case of a company, a legally qualified body, save that only an individual may be a director of a recognised body which is a company;

provided that, where necessary, they comply with the approval requirements in Part 4 of the SRA Authorisation Rules.

16.2

If the authorised body is a licensed body, then the list of permitted partners, members of an LLP or, in the case of a company, directors, registered members or shareowners at 16.1(a) to (f) shall include:

(a)

a licensed body or another body licensed under Part 5 of the LSA by an approved regulator other than the SRA; and

(b)

any other individual or body corporate;

subject to any necessary approval as a manager or owner under Part 4 (Approval of managers, owners and compliance officers) of the SRA Authorisation Rules, save that only an individual may be a director of a licensed body which is a company.

16.3

An authorised body which is an LLP must have at least two members.

Guidance notes

(i)

See 22.3 below regarding the position of firms which have non-lawyer managers prior to 6 October 2011.

(ii)

Although a legal services body can have a variety of types of manager, only a solicitor or an REL may be a sole practitioner.

(iii)

Where, in line with Rule 16, a firm has persons other than solicitors as managers (in particular where European lawyers are involved), any list of the managers will need to:

(a)

identify any solicitor as a solicitor;

(b)

in the case of any lawyer or notary of an Establishment Directive state other than the UK:

(A)

identify the jurisdiction(s) - local or national as appropriate - under whose professional title the lawyer or notary is practising;

(B)

give the professional title(s), expressed in an official language of the Establishment Directive state(s) concerned; and

(C)

if the lawyer is an REL, refer to that lawyer's registration with the SRA;

(c)

indicate the professional qualification(s) of any other lawyer and the country or jurisdiction of qualification of any RFL not included in (b) above;

(d)

identify any individual non-lawyer as a non-lawyer; and

(e)

identify the nature of any body corporate, if this is not clear from its name.

In addition, whenever an REL (whether or not a manager) is named on letterhead used in England and Wales by any firm or in-house practice, the firm or the employer will need to follow the guidance in (iii)(b) above.

Rule 17: Authorised bodies which are companies

Record of non-member shareowners

17.1

Keeping a record

(a)

A recognised body which is a company with shares must keep a record of any non-member interest holders, and retain the record for at least three years after their interest ceases;

(b)

A licensed body which is a company with shares must keep a record of any non-member owners, and retain the record for at least three years after their ownership ceases.

17.2

A member who holds a share as nominee for a non-member shareowner in an authorised body must keep the authorised body informed of all facts necessary to keep an accurate and up-to-date record in accordance with Rule 17.1.

Rule 18: Information and documentation

18.1

An authorised body must supply any information and documentation relating to its composition and structure or to any of its managers, employees, members or shareowners or the sole practitioner, as and when requested to do so by the SRA.

18.2

Notwithstanding any requirement to obtain approval of a manager, owner, COLP or COFA under Part 4 of the SRA Authorisation Rules, an authorised body must notify the SRA within seven days of any change to its:

(a)

name;

(b)

registered office and/or any of its practising addresses;

(c)

managers ;

(d)

interest holders , if it is a recognised body, and in the case of a recognised body which is a company, this includes members and shareowners;

(e)

owners , if it is a licensed body, and in the case of a licensed body which is a company, this includes members and shareowners;

(f)

COLP ;

(g)

COFA ; or

(h)

overseas practices , including any contact details and practising/registered addresses of its overseas practices.

18.3

An authorised body must notify the SRA within seven days if it is an unlimited company and it is re-registered as limited under the Companies Acts.

18.4

If a relevant insolvency event occurs in relation to an authorised body its managers, or in the case of an authorised body which is an overseas company, its directors, must notify the SRA within seven days.

Guidance notes

(i)

There are other SRA reporting and information requirements that apply to individuals or firms. See for example:

(a)

Rules 3, 8.7, 8.8, 8.9 and 8.10 and 18, 23, 24 and 25 of the SRA Authorisation Rules

(b)

Rule 32 of the SRA Accounts Rules

(c)

Regulations 1.2, 4.3, 4.5, 4.8, 4.12, 4.13 and 15 of the SRA Practising Regulations

(d)

Chapter 10 of the SRA Code of Conduct

(e)

Rule 17.3 of the SRA Indemnity Insurance Rules 2013 or any subsequent rules thereto.

(ii)

In addition to the requirement to inform the SRA when certain persons leave the firm, there are the requirements in Rule 8 of the SRA Authorisation Rules for firms to seek approval, where necessary, before certain persons join the firm. This is more onerous than simply informing the SRA of changes that have taken place.