Legal Services Act 2007

Divestiture

The divestiture condition

41 (1) The divestiture condition is satisfied in relation to a non-authorised person and a licensed body if—

(a) the person holds a restricted interest in the licensed body in the circumstances mentioned in sub-paragraph (2), and

(b) the person holds that interest, in whole or in part, by virtue of the person’s shareholding in a body corporate with a share capital (in this Part of this Schedule referred to as “the relevant shares”).

(2) The circumstances are that the person holds the restricted interest—

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

(b) in breach of conditions imposed under paragraph 17, 28, or 33, or

(c) in contravention of an objection by the licensing authority under paragraph 31 or 36.

(3) In sub-paragraph (1)(b), references to a person’s shareholding are to be read in accordance with paragraph 3(3) or 4(2) (as the case may be).

42 (1) If the relevant licensing rules make the provision mentioned in paragraph 38(1)(a) or (b), the divestiture condition is also satisfied in relation to a non-authorised person and a licensed body if—

(a) the person’s shareholding in the body, or a parent undertaking of the body, exceeds the share limit, and the body or parent undertaking (as the case may be) is a body corporate with a share capital, or

(b) the person’s entitlement to exercise or control the exercise of voting rights in the body, or a parent undertaking of the body, exceeds the voting limit by virtue of the person holding shares in a body corporate with a share capital.

(2) In this Part of this Schedule, “excess shares” means

(a) in a case within sub-paragraph (1)(a), the number of shares by which the person’s shareholding exceeds the share limit, and

(b) in a case within sub-paragraph (1)(b), the number of shares held by the person in excess of the number of shares the person could hold without the person’s entitlement to exercise, or control the exercise of, voting rights exceeding the voting limit.

(3) References in this paragraph to a person’s shareholding (or holding of shares) or entitlement are to be read in accordance with any applicable licensing rules made under paragraph 38(3).

Application for divestiture

43 (1) If the divestiture condition is satisfied in relation to a non-authorised person and a licensed body, the licensing authority may give the person a restriction notice under paragraph 44 and apply to the High Court for an order under paragraph 45.

(2) The licensing authority may not make an application to the High Court for an order under paragraph 45 unless—

(a) it has notified the person that it intends to do so if the divestiture condition is satisfied in relation to the person and the body at the end of the relevant period, and

(b) the relevant period has expired.

(3) The relevant period is such period (not less than the prescribed period) as may be specified in the notice.

Restriction notice

44 (1) A restriction notice is a notice directing that such of the relevant shares or excess shares (as the case may be) as are specified in the notice are, until further notice, subject to one or more of the following restrictions.

(2) The restrictions are—

(a) a transfer of (or agreement to transfer) those shares, or in the case of unissued shares a transfer of (or agreement to transfer) the right to be issued with them, is void;

(b) no voting rights are to be exercisable in respect of the shares;

(c) no further shares are to be issued in right of them or in pursuance of any offer made to their holder;

(d) except in a liquidation, no payment is to be made of any sums due from the company on the shares, whether in respect of capital or otherwise.

(3) A copy of the restriction notice must be given to the body to whose shares it relates.

(4) A restriction notice ceases to have effect—

(a) in accordance with an order of the High Court under paragraph 45(4);

(b) if no application has been made to the High Court for an order under paragraph 45 before the end of such period as may be prescribed, at the end of that period;

(c) if the licensed body ceases to be licensed by the licensing authority.

Divestiture by High Court

45 (1) If the divestiture condition is satisfied by virtue of paragraph 41 the High Court may, on the application of the licensing authority, order the sale of the appropriate number of the relevant shares.

(2) The appropriate number of the relevant shares is the number of those shares, the sale of which will result in the non-authorised person no longer holding—

(a) a restricted interest in the licensed body, or

(b) if the non-authorised person holds more than one kind of restricted interest, a restricted interest the person’s holding of which is within paragraph 41(2).

(3) If the divestiture condition is satisfied by virtue of paragraph 42 the High Court may, on the application of the licensing authority, order the sale of the excess shares.

(4) If shares are for the time being subject to any restriction under paragraph 44, the court may order that they are to cease to be subject to that restriction.

(5) If the divestiture condition is satisfied by virtue of paragraph 41(2)(b) or (c), no order may be made under sub-paragraph (1) or (4)—

(a) until the end of the period within which an appeal may be made against the imposition of the conditions or the objection, or

(b) if an appeal is made, until the appeal has been determined or withdrawn.

(6) If an order has been made under sub-paragraph (1) or (3) the court may, on the application of the licensing authority, make such further order relating to the sale or transfer of the shares as it thinks fit.

(7) If shares are sold in pursuance of an order under this paragraph, the proceeds of sale, less the costs of sale, must be paid into court for the benefit of the persons beneficially interested in them.

(8) Any such person may apply to the court for the whole or part of the proceeds to be paid to the person.