SRA Handbook

Notification, effect and duration of authorisation

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Version 18 of the Handbook was published on 01/11/2016. For more information, please click 'History' Above

Part 5: Notification, effect and duration of authorisation

Rule 19: Notification of decisions

19.1

The SRA must notify its decision and reasons in writing when it:

(a)

refuses an application made under these rules;

(b)

grants an application subject to a condition;

(c)

refuses a permission required under a condition on a body's authorisation; or

(d)

withdraws its approval of a candidate under Rules 17 and 18.

19.2

The notification in Rule 19.1 must be given:

(a)

to the applicant or authorised body as appropriate; and

(b)

where appropriate, to the candidate concerned.

19.3

The SRA must give 28 days written notice, with reasons:

(a)

to the authorised body concerned, when the SRA decides to impose a condition on an authorised body's authorisation at any time after the grant of the authorisation;

(b)

to the body and the individual concerned, when the SRA decides to withdraw an approval under Rules 17 and 18.

19.4

The SRA may shorten or dispense with the 28 day period under Rule 19.3(a) if it is satisfied that it is in the public interest to do so.

Guidance note

(i)

The SRA's notification "in writing" may be by any form of written electronic communication normally used for business purposes, such as emails.

Rule 20: Notifying third parties of decisions

20.1

The SRA may, if it considers it in the public interest to do so, publish and notify any persons of a decision concerning a body or an individual made under these rules, including but not limited to:

(a)

an authorised person of which the body or individual concerned is a current, past or prospective manager, employee or interest holder;

(b)

any approved regulator;

(c)

any statutory regulator;

(d)

the Legal Services Board;

(e)

the Legal Ombudsman;

(f)

the regulatory body for any profession of which the individual concerned is a member or which regulates the body concerned; or

(g)

any law enforcement agency.

Rule 21: Effect and validity of authorisation

21.1

A grant of authorisation takes effect from the date of the decision unless otherwise stated, except in the case of a licensed body when authorisation takes effect from the date on which the licence is issued.

21.2

Authorisation continues in force unless it ceases to have effect in accordance with Rule 21.3.

21.3

An authorised body's authorisation ceases to have effect so that the body is no longer authorised by the SRA under these rules:

(a)

from the time that the authorisation is revoked under Rule 22;

(b)

at any time during which the authorisation is suspended;

(c)

subject to Part 6, if the body is wound up or for any other reason ceases to exist; or

(d)

if in relation to a licensed body, the body is issued with a licence by another approved regulator.

Rule 22: Revocation and suspension of authorisation

22.1

Subject to Rule 23, the SRA may revoke or suspend a body's authorisation, where:

(a)

in the case of an authorised body:

(i)

authorisation was granted as a result of error, misleading or inaccurate information, or fraud;

(ii)

the body is or becomes ineligible to be authorised in accordance with the criteria set out in Rule 6;

(iii)

[Deleted]

(iv)

the body has failed to provide any information required by the SRA under these rules;

(v)

the body has failed to pay any prescribed fee payable by the firm to the SRA;

(vi)

a relevant insolvency event has occurred in relation to the body or the sole practitioner is made the subject of bankruptcy proceedings or makes a proposal for an individual voluntary arrangement;

(vii)

the body makes an application to the SRA for its authorisation to be revoked or suspended;

(viii)

the SRA has decided to exercise its intervention powers under section 102 of and Schedule 14 to the LSA, Parts I and II of Schedule 1 to the SA, paragraph 5 of Schedule 14 to the Courts and Legal Services Act 1990 and Part II of Schedule 1 to the SA or paragraph 32 of Schedule 2 to the AJA and Part II of Schedule 1 to the SA, as appropriate;

(ix)

the body, or an owner, interest holder, manager or employee of the body or the sole practitioner fails to comply with the duties imposed by or under these rules or under any statutory obligations in relation to the body's business of carrying on authorised activities including payment of any fine or other financial penalty imposed on the body by the SRA, the Tribunal, the High Court or the appellate body;

(x)

where:

(A)

in the case of a licensed body, the body fails to comply with Rule 8.6(b) (prohibition on disqualified managers); or

(B)

in the case of an authorised body, the body fails to comply with Rule 8.6(c) (employment or remuneration of certain individuals);

and the manager or employee concerned was disqualified as a result of breach of the duties imposed upon the manager or employee by sections 176 or 90 of the LSA;

(xi)

the body does not comply with Rule 8.5 (compliance officers);

(xii)

the body fails to comply with Rule 8.6 (management and control);

(xiii)

for any other reason it is in the public interest; or

(xiv)

the body, where it is a responsible authorised body, has failed to comply with any obligations under the SRA's regulatory arrangements in respect of its overseas practices.

(b)

in the case of a licensed body

a non-authorised person holds an interest in the licensed body:

(i)

as a result of the person taking a step in circumstances where that constitutes an offence under paragraph 24(1) of Schedule 13 to the LSA (whether or not the person is charged with or convicted of an offence under that paragraph),

(ii)

in breach of conditions imposed under paragraphs 17, 28 or 33 of that Schedule, or

(iii)

the person's holding of which is subject to an objection by the SRA under paragraph 31 or 36 of that Schedule.

22.2

The SRA must not revoke or suspend an authorisation under this rule:

(a)

unless it has first provided the authorised body with an opportunity to provide representations to it regarding the issues giving rise to the proposed revocation or suspension;

(b)

unless it has first given the authorised body notice of its intention to revoke or suspend the authorisation; and

(c)

before the end of the period of 28 days beginning with the day on which the notice in (b) above is given to the body or any longer period specified in the notice.

Guidance notes

(i)

Rule 22.1(a)(x) refers to sections 90 and 176 of the LSA. Section 90 sets out the duty of non-authorised persons, as defined by the LSA, not to do anything which causes or substantially contributes to a breach by a licensed body, or by a manager or an employee of the licensed body who is an authorised person, of the duties imposed on them by section 176. Section 176 imposes the statutory duty on a regulated person to comply with the SRA's regulatory arrangements when practising through an SRA firm. Regulated person includes the firm itself as well as the managers and employees of the firm.

(ii)

Rule 22.1(b)(i) refers to the offence under paragraph 24(1) of Schedule 13 to the LSA. This is the offence of a non-authorised person who is required to notify the licensed body and the SRA of a proposal to take a step leading to acquiring a restricted interest in a licensed body taking the step prior to the SRA's approval. Rule 22.1(b)(ii) refers to breaches of the specific provisions about imposing conditions on approval of owners - see guidance note (ii) to Rule 15 above. Rule 22.1(b)(iii) refers to paragraphs 31 (the SRA having an objection to a notifiable interest) and 36 (the SRA having an objection to an existing restricted interest) of Schedule 13 to the LSA.

(iii)

In addition to the power to revoke or suspend authorisation, there are statutory divestiture procedures available to the SRA in respect of owners of licensed bodies. These are set out in Part 5 of Schedule 13 to the LSA. See also the guidance notes to Rule 15 for more information about other statutory powers relating to owners of licensed bodies.

(iv)

Revocation and suspension of authorisation is a discretionary power of the SRA. The SRA is unlikely to revoke or suspend authorisation if doing so at that time would present any risk to clients, the public, the protection of public money or to any SRA investigation.

Rule 23: Unforeseen temporary breach of certain conditions and eligibility criteria

23.1

Unforeseen breach of eligibility criteria

(a)

If due to an event which could not reasonably have been foreseen, a licensed body is no longer a licensable body:

(i)

because the body no longer has at least one manager who is an individual and who is an authorised person (other than an RFL or an EEL who is not registered with the BSB under Regulation 17 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119)) in relation to a licensed activity; or

(ii)

because:

(A)

the body no longer has a manager or interest holder who is a non-authorised person; and

(B)

non-authorised persons are no longer entitled to exercise, or control the exercise of, at least 10% of the voting rights in any body which is a manager or interest holder of the licensed body;

but the SRA is informed of that fact within seven days of the event first occurring and the body becomes a licensable body again within 28 days of the event first occurring, then the licensable body will be deemed to have remained a licensable body and to that extent will not be liable to have its authorisation revoked or suspended under Rule 22.

(b)

If due to an event which could not reasonably have been foreseen, a recognised body is no longer a legal services body because the body no longer has at least one manager who is:

(i)

a solicitor;

(ii)

an REL; or

(iii)

a legally qualified body with at least one manager who is a solicitor or an REL;

but the SRA is informed of the fact within seven days of the event first occurring and the body becomes a legal services body again within 28 days of the event first occurring, then the recognised body will be deemed to have remained a legal services body and to that extent will not be liable to have its authorisation revoked or suspended under Rule 22.

23.2

An LLP having fewer than two members

(a)

If an event which could not reasonably have been foreseen results in an LLP having fewer than two members, and therefore being in breach of Rule 16.3 (requirement to have at least two members) of the SRA Practice Framework Rules, but within six months the situation is remedied, and provided the LLP has remained in a position to comply with the remainder of the SRA's regulatory arrangements including these rules and any conditions imposed on its authorisation, the LLP will be deemed to have remained in compliance with Rule 16.3 of the SRA Practice Framework Rules and to that extent will not be liable to have its authorisation revoked under Rule 22.

23.3

Death of member or shareowner of a company

(a)

If an authorised body is a company with shares and a member or shareowner dies who had been approved under Part 4 to be a member or shareowner of the body at the date of death, then, whether or not the personal representatives have been approved under Part 4, the personal representatives may replace the deceased member or shareowner in their capacity as personal representatives, provided that:

(i)

no vote may be exercised by or on behalf of a personal representative (and no such vote may be accepted) unless all the personal representatives have been approved under Part 4 to be members or shareowners;

(ii)

no personal representative may hold or own a share in that capacity for longer than 12 months from the date of death;

(iii)

within 12 months of the death the authorised body must cancel or acquire the shares or ensure that they are held and owned by persons who can hold the interest in the body in compliance with Rule 8.6 (management and control), but without this resulting in RFLs being the only shareowners of a recognised body; and

(iv)

no vote may be exercised by or on behalf of any personal representative (and no such vote may be accepted) after the 12 month period has expired.

(b)

If, following the death of a member or shareowner, a company meets the requirements of (a) above, the company will be deemed to have remained in compliance with Rule 8.6 (management and control), and to that extent will not be liable to have its authorisation revoked under Rule 22.

23.4

Member or shareowner ceasing to be approved

(a)

If an authorised body is a company with shares and a member or shareowner ceases to be approved under Part 4 to be a member or shareowner of the body, or ceases to exist as a body corporate, then provided that:

(i)

no vote is exercised or accepted on the shares held by or on behalf of that member or shareowner;

(ii)

a trustee in bankruptcy or liquidator (whether approved under Part 4 or not) replaces that member or shareowner in the capacity of trustee or liquidator for a period not exceeding six months from the date the member or shareowner ceased to be approved; and

(iii)

the company cancels or acquires the shares within six months, or within that time ensures that the shares are held and owned by persons in compliance with Rule 8.6, but without this resulting in the body ceasing to be a licensable body (in the case of a licensed body), or ceasing to be a legal services body (in the case of a recognised body);

the company will be deemed to have remained in compliance with Rule 8.6 (management and control), and to that extent will not be liable to have its authorisation revoked under Rule 22.

23.5

Member or shareowner becoming insolvent but remaining compliant

(a)

If an authorised body is a company with shares and a member or shareowner becomes insolvent but continues to hold an interest in the body in compliance with Rule 8.6, then the trustee in bankruptcy or liquidator (whether approved under Part 4 or not) may replace the insolvent member or shareowner in the capacity of trustee in bankruptcy or liquidator, provided that:

(i)

no vote may be exercised by or on behalf of a trustee in bankruptcy or liquidator (and no such vote may be accepted) unless the trustee or liquidator can hold the interest in the company in compliance with Rule 8.6;

(ii)

no trustee in bankruptcy or liquidator may hold or own a share in that capacity for longer than six months from the date of the insolvency;

(iii)

within six months of the insolvency the company must cancel or acquire the shares or ensure that they are held and owned by persons who can hold an interest in the company in compliance with Rule 8.6, but without this resulting in the body ceasing to be a licensable body (in the case of a licensed body), or ceasing to be a legal services body (in the case of a recognised body); and

(iv)

no vote may be exercised by or on behalf of any trustee in bankruptcy or liquidator (and no such vote may be accepted) after the six month period has expired.

(b)

If (a) above applies and a company meets its requirements, the company will be deemed to have remained in compliance with Rule 8.6 (management and control), and to that extent will not be liable to have its authorisation revoked under Rule 22.

23.6

Court of Protection deputy

(a)

A Court of Protection deputy appointed under section 19 of the Mental Capacity Act 2005 may be a member or shareowner in that capacity of an authorised body, without breaching Rule 8.6 (management and control), provided that:

(i)

the person in respect of whom the deputy has been appointed holds the interest in compliance with Rule 8.6; and

(ii)

if the deputy is not a member or shareowner in compliance with Rule 8.6, no vote is exercised or accepted on the shares.

(b)

If (a) above applies and a company meets its requirements, the company will be deemed to have remained in compliance with Rule 8.6, and to that extent will not be liable to have its authorisation revoked under Rule 22.

Guidance notes

(i)

The provisions in Rule 23 allow firms time to rectify the position where unexpected changes occur. The effect of the provisions is to allow firms a period to avoid being in breach of SRA rules. Recognised bodies need also to consider the time limit of 90 days to obtain a licence which is imposed by section 18(3) of the LSA on such existing bodies that become licensable. Likewise, licensed bodies need to consider the time limit of 90 days to obtain a certificate of recognition which is imposed by section 18(6) of the LSA on existing licensed bodies that cease to be licensable.

(ii)

If the changes in 23.2, 23.3, 23.4, 23.5 and 23.6 occur, firms will need to notify the SRA under Rule 8.7 and under Rule 18.2 of the SRA Practice Framework Rules.