The Solicitors Regulation Authority (SRA) is unlikely to start licensing alternative business structures (ABSs) until 2012, it has confirmed.
The news comes as the authority spelt out the detailed level of information about investors in prospective ABSs that it will expect to see.
As first reported on Legal Futures last month, parliamentary delays mean the SRA will not be formally designated as an ABS licensing authority in time for the long-planned start-date of 6 October. The Ministry of Justice is still hoping this will happen by the end of the year.
Formal applications to become ABSs can only be submitted once the SRA is designated, and the Legal Services Act allows it up to six months to make a decision on them (a period which can be extended by a further three months).
The SRA said yesterday that it intends to process most applications “well within the statutory standards”, but this still means it is “likely to begin licensing ABS in early 2012”.
The guide to becoming an ABS published yesterday said applicants will have to give details of every source of finance, including the amount of capital invested or borrowed, percentage interest, date of loan, repayment terms and date of renewal. Those who hold a material interest by association are also captured by this.
“We will expect applicant bodies to know who the ultimate beneficial owner of the body is going to be at authorisation,” it added.
There will be exceptions where it is not reasonable to expect the applicant to know this information, for example with public limited companies and private equity investment funds.
The SRA said it will work with such applicants “to determine the individual challenges they may face in complying with this part of our Handbook and to what extent they can reasonably have knowledge of this information”.
In considering whether an applicant can reasonably identify all the owners with less than 3% holdings, “we will have regard to the number of owners, the ownership structure and the nature of the associations.
“So, for example, in the case of initial public offerings and public limited companies, we will expect an applicant or authorised body to notify us of owners with a holding of 3% or more, as we understand that this is the accepted level at which they will be notified by their relevant exchange.”
ABS applicants also have to provide the projected balance sheet, and monthly cash flow and profit and loss for the first year of trading after authorisation.
In addition, they will have to detail the nature of any outsourcing arrangements, and if offshore whether the countries involved comply with appropriate data protection legislation.
SRA executive director of authorisation, Mike Jeacock, said: “Protecting the public is our first priority, so there will be a robust authorisation process to ensure that only those that meet all the criteria will be awarded a licence.”