245.This Part of schedule 1 makes a wide range of changes to recalibrate the 1980 Act towards regulating legal businesses. As noted above, a legal business is any business entity that provides legal services to the public and includes sole traders, partnerships and the permitted forms of incorporated practice that are already regulated under the 1980 Act.
246.The changes made to schedule 1 generally remove references to firms and incorporated practices and replace them with the broader concept of the authorised legal business. In other places however, the move shifts the current regulatory provision away from the individual solicitor or practitioner onto the business. This distinction may be less obvious in the case of the sole trader but there is still a business which is distinct from the individual who runs it, and this business will require separate authorisation.
247.Paragraph 9 makes a consequential change to section 3F of the 1980 Act.
248.Paragraph 10 amends section 18 of the 1980 Act to enable the authorisation of a legal business to be withdrawn (as well as recognition of an incorporated practice being revoked) in the circumstances set out in section 18(1A) of the 1980 Act.
249.Paragraph 11 amends section 21 of the 1980 Act to bring in the remaining types of authorised legal business for determining whether or not a person is a consultant.
250.Paragraph 12 makes consequential changes to section 28 of the 1980 Act.
251.Paragraph 13 amends section 34 of the 1980 Act to permit the Law Society to make rules about professional practice, conduct and discipline in relation to all forms of legal business. This should be read with sections 41 and 48 which also make provision in connection with the making of rules for authorised legal businesses.
252.Paragraph 13(3) makes it clear that the rules can provide that where a recognition of an incorporated practice is revoked, the body’s authorisation as a legal business may be reviewed or withdrawn. The loss of recognition for an incorporated practice is likely to make it untenable for it to continue to be authorised. However, there may be circumstances (such as restructuring) where this isn’t the case and so flexibility is left to the Law Society to put in place the appropriate rules.
253.Paragraphs 14 to 17 adjust sections 35 to 37A of the 1980 Act (which deal with accounts rules, interest on clients’ money etc.) to shift the onus onto compliance with the rules by the legal business. However, provision is made for an individual solicitor (or solicitors) within each firm to have responsibility for compliance to ensure that there is direct accountability.
254.Paragraph 18 makes consequential changes to section 39A of the 1980 Act.
255.Paragraph 19 makes consequential changes to section 40 of the 1980 Act.
256.Paragraph 20 makes consequential changes to section 41 of the 1980 Act.
257.Paragraph 21 adjusts section 42 of the 1980 Act to incorporate authorised legal businesses. In doing so, it is necessary to add to the range of events which may trigger when the powers in the section may apply. The adjustment to section 42(2)(b) is for consistency and modernisation of language. It is not intended to change the legal effect of the provision.
258.Paragraphs 22 to 24 make consequential changes to both section 43 and schedule 3 of the 1980 Act.
259.Paragraph 25 makes consequential changes to section 44 of the 1980 Act.
260.Paragraph 26 inserts new sections 45A and 46A into the 1980 Act. Those sections have effect where an authorised legal business whose authorisation to provide legal services is suspended or withdrawn (referred to in the Act as a “former authorised legal business”), or, in the case of an authorised legal business which is effectively a sole solicitor, on the death, incapacity or disqualification of that solicitor. The new sections vest any client funds in the Law Society alone (together with the right to deal with and operate on any client account) and the Society would be able to issue directions setting out how other client assets (files and documents, for example) are to be dealt with. The Council may direct any former authorised legal business to take (or stop taking) any specified action considered necessary or expedient for safeguarding the interests of the clients of the former authorised legal business. The former authorised legal business may appeal to the court against such a direction.
261.Under new section 45A(9), the Court can make an order requiring the former authorised legal business to comply with a direction under subsection (4). It may also vary a direction, or prevent payments being made out of any account in the name of the former authorised legal business (unless the Court gives leave for the payment to be made) or make any other order it sees fit. The Court also has equivalent powers under new section 46A(5).
262.Paragraph 27 amends section 62A of the 1980 Act and section 70 of the 2010 Act.
263.Section 62A of the 1980 Act is amended to allow the Council to apply to the Court to recover a specified portion of any expenditure incurred as a result of any intervention under new sections 45A and 46A of the 1980 Act. However, it can only do so where the conduct giving rise to the intervention was carried on with the consent or connivance of, or was attributable to any neglect on the part of, the individual against whom the order is sought.
264.Section 70 of the 2010 Act makes provision to safeguard the interests of clients of a licensed provider which is ceasing or has already ceased by giving the approved regulator the power to issue directions setting out how client documents are to be dealt with. The amendment to section 70 vests any client funds in the approved regulator alone (together with the right to deal with the client account). It also allows the approved regulator, to apply to the Court to recover a specified portion of any expenditure reasonably incurred as a result of any intervention under section 70 of the 2010 Act, from a responsible official such as a current or former investor in, or a current or former director of, the licensed provider. However, it can only do so where the conduct giving rise to the intervention was carried on with the consent or connivance of, or was attributable to any neglect on the part of, the individual against whom the order is sought.
265.Paragraph 28 makes consequential amendments to section 47 of the 1980 Act.
266.Paragraphs 29 to 33 amend sections 51 to 54 and schedule 4 of the 1980 Act to enable complaints to be brought against all types of authorised legal business in a manner that is similar to how incorporated practices were treated previously. This therefore means that sole traders or law firms may now face complaints for the actions of their business as an entity, in a way that was not previously possible.
267.Paragraph 34 makes consequential amendments to section 61 of the 1980 Act.
268.Paragraph 35 makes consequential amendments to section 62A of the 1980 Act.
269.Paragraph 36 makes consequential amendments to section 64 of the 1980 Act.
270.Paragraph 37 amends section 65 of the 1980 Act to define “authorised legal business” and “
271.Paragraph 38 amends schedule 1 of the 1980 Act. These changes enable the Law Society to charge an annual fee in relation to an authorised legal businesses. Different fees may be charged based on the financial performance of the business or its size etc. For example, this may mean that fees are set by reference to the Scottish turnover of a legal business or the number of solicitors it employs.
272.The amendments also permit the Law Society to set an annual subscription of £0 for members to enable (but not require) the Law Society to shift to a funding model where the majority, if not all practice fees, are the responsibility of the business rather than individual solicitors.