Frequently asked questions – Applications to be authorised as an ABS (licensed body) and post application approvals
How do we apply to be authorised as an ABS?
The licensing process for ABS involves:
· assessment of the applicant body (its governance, business model, systems and controls, etc);
· approval of the Head of Head of Legal Practice (HoLP) and Finance and Administration (HoFA); and
· approval of non-lawyer managers and non-lawyer-owners who hold a “material interest”.
Managers, owners and the HoLP and HoFA are “role holders”.
The authorisation process will be risk-based; we will analyse the risks to clients and the public generally in determining whether the body should be authorised and, as part of that, whether the role holders should be approved.
What factors would IPReg take into account when considering whether or not to approve a person as a HoLP, HoFA, manager or material interest holder?
Firstly, the candidate must meet the eligibility criteria set out in the Registered Bodies Regulations 2015. IPReg must also be satisfied that the person concerned is “suitable to be involved in the provision of legal services”; indicators of the circumstances in which an individual may not be suitable are set out in Rule 14 of the Regulations. With regard to other matters, IPReg considers each case on its merits.
For material interest holders, IPReg would consider such matters as:
· whether the identity and ownership of the material interest holder was clear (this may be particularly relevant to nominee companies and private equity arrangements);
· the nature of the material interest, the role to be played in the direction of the firm and whether this might have a negative impact on the provision of legal services.
See also “Frequently asked questions – Head of Legal Practice and Head of Finance and Administration”.
What is a “material interest”?
A “material interest” is defined in Schedule 13 of the Legal Services Act 2007 (LSA). It can be a complex issue, not least because it covers both ownership and management rights; however, in summary, it is either:
· an equity interest of ten per cent or more (directly or indirectly) in the applicant body; or
· another interest (whether through equity or management) that allows a significant influence over the applicant body.
IPReg’s approach to the authorisation process is to ask applicant bodies to disclose all rights and interests of managers and owners so that we may determine what requires approval under Schedule 13 of the LSA.
Non-lawyer managers and non-lawyer owners who, whether by entitlement, or de facto and whether alone or on an associated basis (e.g. with a spouse or civil partner or, if the interest holder is a corporate body, a director), fall into one of the following categories will, according to the Legal Services Act[1], hold a material interest:
· holders of at least 10% of the shares in the applicant body or a parent undertaking of the applicant body;
· others who exercise significant influence over the management of the applicant body or a parent undertaking by virtue of their shareholding in the applicant body or parent undertaking;
· others who exercise, or control the exercise of, voting power in the applicant body or parent undertaking which, if it consists of voting rights, constitutes at least 10% of the voting rights in the applicant body or parent undertaking; or
· others who exercise significant influence over the management of the applicant body or parent undertaking by virtue of their entitlement to exercise, or control the exercise of, voting rights of the applicant body or parent undertaking.
In assessing significant influence, IPReg will consider factors such as whether individuals:
· have the ability to impose directions on the operating or financial policies of the applicant body or a parent undertaking (including, for example, by virtue of any Articles of Association or a control contract);
· have an unqualified right to appoint or remove the majority of directors of the applicant body or a parent undertaking; and/or
· have any right of veto or are otherwise able to have dominant influence in respect of the exercise of voting power with regard to the applicant body or a parent undertaking.
What fees will be charged for authorisation?
The fees for ABS will have two elements:
· the fees for getting authorised; and
· the annual practising fees.
Fees for becoming authorised
The fees for becoming authorised are a (non-refundable) fee equivalent to the relevant annual practice fee. An applicant firm may, for a (non-refundable) fee of £1000, request the (non-binding) opinion of IPReg on whether IPReg has suitable regulatory arrangements to license that firm. The fee for an initial review does not apply to firms who are already registered and transitioning to licensed status.
Practising fees
We have recently decided not to alter our arrangements for 2015 for entity practising fees. We may consult in 2015 regarding a possible move of the fee matrix to a turnover-based calculation for 2016.
What sort of activities could a firm conduct if it wants to be licensed by IPReg?
The IPReg Registered Bodies Regulations 2015 set out the types of Iegal work that a firm may conduct if it wishes to be authorised as a licensed body (ABS) by IPReg. IPReg is only able to authorise firms as ABS that conduct IP legal work; those wishing to conduct other forms of legal work such as conveyancing, criminal, and commercial litigation (other than litigation relating to patents, trade marks and registered designs) should seek authorisation from another licensing authority. If a firm is in any doubt as to whether it could be authorised by IPReg, we would be happy to have informal discussions and a more formal view can be sought from IPReg under the Regulations as set out above.
How different are IPReg’s rules for ABS as compared with registered bodies?
IPReg has sought, as far as possible, to ensure that its rules are the same, whatever the type of body. The only exception to that is where there are statutory differences. An explanation of IPReg’s approach was set out in the consultation held in June 2012 and in IPReg’s licensing authority application which can be found here (http://ipreg.org.uk/wp-content/files/2012/10/Licensing-Application-May-2013.pdf ).
IPReg has agreed, however, a distinction in relation to practices registered with IPReg but based in Scotland and Northern Ireland. We issued a news statement regarding this.
What happens if we want to change a HoLP, HoFA, manager or material interest holder after the body is authorised?
You will have to notify IPReg of the proposed change and obtain approval before the proposed new HoLP, HoFA or manager took up their post or the material interest holder acquired their interest.
If I am approved as a HoLP, HoFA, manager or material interest holder, and move to another firm, can I take my approval with me or do I need to be approved as a HoLP, etc for my new firm?
Approvals to be a role holder are firm-specific; they cannot be transferred from one firm to another. However, depending on how recently the approval was granted, it may be that IPReg would not need to go through the full approval process when the individual/entity moves to another firm as HoLP, etc or applies for approval as a material interest holder in another entity.
[1] Please see paragraphs 3, 4 and 5 of Schedule 13 of the Legal Services Act 2007.