This means that, as of 31 March 2012, recognised bodies need to seek the SRA's approval for new managers and owners in advance of them joining the firm, rather than just notifying us. The approval process must be completed in advance, it cannot be undertaken retrospectively.
New manager approvals
Following the introduction of the SRA Authorisation Rules for Legal Services Bodies and Licensable Bodies 2011 (SRA Authorisation Rules), new managers and owners of authorised bodies require approval prior to taking up their post. This requirement goes hand in hand with our outcome-focused approach to regulation. We are now less prescriptive in our rules about the way in which firms operate; concomitantly, we have introduced a more rigorous approval process for both firms and for key role holders.
Whilst all managers and owners require approval under our rules, certain categories of persons are "deemed approved" which means that, once we have been notified of their appointment, they may take up their post.
The deemed approved criteria is set out at rule 13.2 of the SRA Authorisation Rules. In summary, a solicitor who holds a current practising certificate, free from any condition that restricts their ability to be a manager or owner, and has not been disqualified from being a manager or owner, is deemed approved. There are equivalent provisions for deemed approved REL's, deemed approved RFL's and authorised bodies wishing to become managers or owners.
Where a person is deemed approved, we must be notified prior to taking up post. Such notification should be made on an NM1 form available to download above. Once the NM1 has been submitted, we will typically process the form within seven days, and in all cases, processing will be completed within 10 working days. We will then contact the applicant firm by email to confirm that the deemed approval has taken effect.
The deemed manager or owner may take up their post prior to receiving confirmation from us, as long as the deeming criteria have been met. However, if the manager or owner decides to take up post prior to receiving confirmation, they do so at their own, and the firm's, risk. We will check all of the information provided on the NM1 form against our own records for the individual. There may be circumstances where a person considers themselves to be eligible to be deemed as approved when they are not. If we assess that the person is not eligible to be deemed approved, and they have already taken up their post as a manager or owner, we will send the firm an NM2 or NM3 form (as appropriate) to complete and return.
Those persons who do not meet the deemed approved criteria will need to submit either a NM2 form (for individuals) or NM3 form (for corporate managers or owners) to us for approval, in advance of taking up their post. The person must not take up their post until they have received confirmation from us that they are approved.
The approval process will include considering the proposed manager or owner in light of the SRA Suitability Test. We may also undertake validation of the information provided in the Suitability Test.
Typically, we expect to complete consideration of NM2 and NM3 applications within 30 days of receipt of a complete application. In complex cases, or in cases where information needs to be obtained from overseas, processing NM2 and NM3 forms may take longer than 30 days. The rules provide for a decision period of six months, but we expect that decisions would only take this length of time in the most exceptional circumstances and as a result of extensive investigations. In such cases we would keep the applicant firm informed of the progress of the application.
Other UK lawyers
We have been asked whether it is possible for non-solicitor UK lawyers to be subject to the "deeming" procedure rather than the fuller application and approval process, including the Suitability Test, when applying to take up post as a manager or owner. There have also been requests to recognise, as sufficient, the entry process for other jurisdictions.
We need to ensure that all persons meet the same standard in respect to their fitness and propriety in taking up roles of managers or owners of firms within our own jurisdiction but we are already exploring the potential for recognition of reciprocal arrangements. Where equivalent standards exist, we will work to ensure that our approval process takes this into account when assessing individuals.
However, these developments will take time and in the interim it is vital, both for the protection of the public and the profession itself, that we maintain the required standard through our approval process. With the availability of the deeming provision where appropriate, and with a focus on our part in concluding other applications quickly, we believe that the approval process should not hamper firms in making appointments.
The SRA's move to outcomes-focused regulation and the new SRA Handbook came into effect on 6 October 2011. Part 5 of the Legal Services Act 2007 (LSA) also came into effect on this date. This is the section of the LSA which allows the introduction of alternative business structures (ABS).
This means that on 6 October 2011, the door to new non-lawyer manager Legal Disciplinary Practices (LDPs) closed and all such bodies are "licensable" and need to apply to us to become authorised as an ABS.
If, however, your firm was an existing recognised body which did not comply with rule 13.1(b) of the SRA Practice Framework Rules 2011 on 6 October 2011, (which included that up to 25 per cent of the body's managers were individual non-lawyers approved by the SRA under regulation 3 of the Recognised Bodies Regulations), it can continue to be treated as a recognised body, until
- it ceases to comply with the management and control requirements set out in the transitional provisions and grace period of the SRA Practice Framework Rules 2011 (rule 22), or
- the end of the transitional period under Part 2 of Schedule 5 of the LSA, or until it elects to become a licensed body.
If your firm is covered by the transitional provisions and grace period set out in rule 22 of the SRA Practice Framework Rules 2011 and you would like to apply for non-laywer to be approved as a manager or owner, please contact us to obtain an application form for approval of a non-lawyer as suitable to be a manager of a recognised body (NL1).
Please note, with each non-lawyer application, the SRA will require an up-to-date (within the last three months) criminal records check. Upon requesting the NL1 form, a criminal records check link will be sent to you. The application will not be approved until the correct fee is paid and the completed criminal record check is received.
All-lawyer LDPs however, cannot apply for non-lawyers to become managers of their firms. The only avenue for such bodies would be to make an application to become an ABS.
See further information on the NL1
Where a person has not been approved firms must not "hold out" persons as managers. Whether a person is a manager or owner is a matter of fact: if an individual takes up their role as a manager or owner prior to approval, the firm will be in breach of the SRA Authorisation Rules.
Approval attaches to the firm
Please note that approval of a person (whether or not they are deemed) as a manager or owner attaches to the firm and not to the person: They are not able to "carry" their approval with them to another firm. The approval is not transferable. By way of example, if Person X is approved to be a manager of Firm A, and also wishes to be a manager of Firm B, they would be required to submit another NM1, 2 or 3 (dependent on the circumstances) in respect of Firm B notwithstanding their approval at Firm A. If an individual is in the process of taking up roles at more than one firm within a short space of time they should contact us to discuss how this can best be managed so as to reduce the amount of administrative work required, e.g. it might be possible to ensure that a number of approvals are dealt with at the same time.
We recognise that, there may be exceptional circumstances where a firm is keen to take on a new manager or owner within a short time period. We would encourage firms to make new manager applications at the earliest possible opportunity. We are prepared to provide "advance approval" to help firm's timetables, even if the individual ultimately does NOT take up post. We may be able to deal with some applications in a shorter time period than set out above but must do so with due consideration to the needs of other applicants. For urgent applications, please contact our Contact Centre on 0870 606 2555. Please note, we cannot guarantee that we can process applications within a firm's timescales.
Taking up post
Once we have approved a lawyer manager and owners, that person has 90 days to take up their post, unless we indicate to the contrary in our decision. If that time has elapsed without the person taking up post, the approval lapses and a fresh application should be made (if necessary).