Revealed: SRA ABSs clear final hurdle with non-lawyer owners facing convictions check

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By Legal Futures

7 October 2011

Parliament: debate unlikely until next month

Non-lawyer investors in alternative business structures (ABSs) will have to disclose any previous convictions, even if spent, to pass the ‘fit and proper owner’ test, Legal Futures can reveal.

Clearing the last major hurdle to the full adoption of ABSs, the Ministry of Justice (MoJ) has confirmed that after months of consideration, it has decided to grant an exception to the Rehabilitation of Offenders Act 1974.

The Solicitors Regulation Authority (SRA) had said it would find it “very difficult” to operate the ABS regime for external investors without the exception, and found support for its position in the House of Lords. The SRA now hopes to start licensing ABSs in January 2012.

An MoJ spokesman said: “We have been working to address the concerns raised by stakeholders about the risks of criminal ownership of ABS and the need to safeguard against this. We have carefully considered the business case submitted by the Legal Services Board.

“We believe that the inclusion of spent conviction information within the fitness to own test for non-lawyers with a restricted interest [meaning more than 10%] in a licensed body will improve the assessment as to whether a person is fit and proper to own an ABS, and that information relating to any spent convictions will help to mitigate the risk that ABS will be open to a risk of criminal ownership.”

He said officials appreciated that the SRA wanted the order in force for when it becomes an ABS licensing authority. “We are committed to expediting the work on the exceptions order.”

The order designating the SRA as a licensing authority cannot be made until there is a body in place with the power to hear appeals against its licensing decisions. An affirmative order to establish these arrangements was laid before Parliament on 15 September. The MoJ’s current estimate is that the appeals order is unlikely to be debated before November.

The upshot of all this is that the current mooted timetable of the SRA beginning to accept ABS applications in December and issues its first license in January, or possibly February, remains on track, although no definitive start date is in sight.

Meanwhile, the Sole Practitioners Group has started a last-ditch campaign to halt the introduction of SRA-licensed ABSs, launching an anti-ABS website, calling for supporters to lobby their MPs and setting up an e-petition on the government’s new website. Since going up two days ago, 20 people have signed it; if 100,000 do, it will be eligible for debate in the House of Commons.

The group’s honorary secretary, Clive Sutton, appeared on BBC Radio 4’s Today programme yesterday to debate ABSs with Jonathan Gulliford of Co-operative Legal Services.

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