Rule D5: Incorporated Practices
Interpretation
5.1 In this rule 5, unless the context
otherwise requires, terms listed in the first column of rule 5.1
shall have the meanings respectively ascribed to them in the second
column of that rule:
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Term
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Definition
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1986 Act
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the Company Directors Disqualification Act 1986 and shall
include that Act as applied to limited liability
partnerships and any legislation in any other
jurisdiction having equivalent effect
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registrar of companies
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the registrar or other officer performing under the Companies
Act 2006 the duty of registration of companies or of registration
of limited liability
partnerships, as the case may be
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Permission
5.2 Subject to the provisions of
rule 5, you may trade as a body corporate in terms of section
34(1A) of the 1980 Act provided:-
(a) any such body
corporate has been recognised by the Council as an incorporated
practice;
(b) the control
of any such body corporate is exclusively by solicitors, firms of
solicitors, registered European
lawyers, registered
foreign lawyers or
other incorporated
practices;
(c) the membership
of any such body corporate is restricted to solicitors, firms of
solicitors, registered European
lawyers, registered
foreign lawyers or
other incorporated
practices;
(d) no person shall
control such body or be a member or director of such body if
he is prohibited from practising as a manager in terms of
rule 2.1; and
(e) the
registered office of any such body corporate is situated
in Scotland.
Application
5.3 If you wish to form an incorporated
practice you shall, at least one month prior to
the anticipated date of commencement of business as such
incorporated
practice, submit to the Council:
(a) in all
cases-
(i) the names, designations and
business addresses (and, where appropriate, registered
offices) of all persons who will be members of the incorporated
practice;
(ii) the proposed name, and address
of the registered office, of the incorporated
practice;
(iii) a completed application for
recognition as an incorporated
practice in such form as may be prescribed
from time to time by the Council; and
(iv) the fee to be prescribed from
time to time by the Council in connection
with such application;
(b) in the case of
an incorporated
practice which is to be a company-
(i) the names, designations and
business addresses (and, where appropriate, registered offices) of
all persons who will be directors of the incorporated
practice; and
(ii) a draft of the memorandum and
articles of association of the incorporated
practice;
(c) in the case of
an incorporated
practice which is to be a limited
liability partnership,
a draft of the incorporation document of the incorporated
practice; and
(d) in the case of
an incorporated
practice to be incorporated with limited
liability, an irrevocable undertaking to the Council by each of the
persons who will be members of the incorporated
practice that he or it or they will jointly and
severally along with the other members of the incorporated
practice reimburse to the Society grants paid out of the
Guarantee Fund to a person
who has suffered pecuniary loss by reason of dishonesty on the part
of the incorporated
practice or any member, director, manager, secretary or other
employee thereof and that to any extent to which
the Society shall have been unable to
recover the amount of said grants from the incorporated
practice or any liquidator or administrator
thereof (which undertaking may provide that the granter shall have
no liability in terms of the undertaking to reimburse
the Society for grants paid out in
respect of dishonesty that takes place subsequent to the granter
ceasing to be a member of the relevant incorporated
practice).
Memorandum and Articles of Association
5.4.1 The memorandum and articles of
association of an incorporated
practice which is a company shall contain provisions
which show that it complies and will continue to comply with this
rule 5 (as in force from time to time) including, without prejudice
to the foregoing generality, provisions to the following
effect:-
(a) that no person
shall be appointed or re-appointed or act as a director unless he
is a member of the incorporated
practice duly qualified to be a member within the
meaning of sub-paragraph (d) of this rule 5.4.1;
(b) that no person
other than a person duly qualified to act as a director may be
appointed as an alternate director;
(c) that a
director or alternate director shall vacate office if he ceases to
be a member of the company or to be qualified to act
as a director;
(d) that no person
shall be qualified to be a member of the incorporated
practice or (subject to sub-paragraph (f) of this
rule 5.4.1) enjoy any of the rights of members (i) if that person
is prohibited from practising as a manager in terms of rule 2.1 and
(ii) unless he or it is a solicitor, registered European
lawyers or registered foreign
lawyer or firm of solicitors or an incorporated
practice;
(e) that
(subject to sub-paragraph (f) of this rule 5.4.1) any member who
ceases to be duly qualified within the meaning of sub-paragraph (d)
of this rule 5.4.1 shall forthwith transfer his or its shares or
other interest in the incorporated
practice to another person who is so qualified,
or otherwise cease to be a member of the incorporated
practice;
(f) that, in the
case of an incorporated
practice which has a share capital, the
executor of a deceased member of the incorporated
practice shall have no voting rights in respect
of his membership of the incorporated
practice; and
(g) that, in the
case of an incorporated
practice limited by guarantee, membership shall
cease on death.
5.4.2 The memorandum and articles of
association of an incorporated
practice which is a company shall contain provisions
to anticipate and to deal with the situation where for whatever
reason there is no longer a person qualified to do so in terms of
rule 5.2 exercising the day to day management and control of the
incorporated
practice. Without prejudice to the foregoing, the
memorandum and articles shall contain specific provisions for:-
(a) the operation
in the situation aforesaid of all client accounts in the
name of the incorporated
practice; and
(b) suitable
arrangements in the situation aforesaid for making available to its
clients or to some other regulated
person instructed by its clients or
itself:-
(i) all deeds, wills, securities,
papers, books of account, records, vouchers and other documents in
its possession or control which are held on behalf of its clients
or which relate to any trust of which it is sole trustee or
co-trustee only with one or more of its employees; and
(ii) all sums of money due from it
or held by it on behalf of its clients or subject to any trust
as aforesaid.
5.4.3 The memorandum and articles of
association of an incorporated
practice which is a company shall be only in terms
previously approved by the Council, following submission of
a draft thereof in terms of rule 5.3 (b)(ii), and thereafter no
such incorporated
practice shall alter its memorandum and articles
without the prior consent of the Council.
5.4.4 The Council may charge a fee to be
prescribed from time to time by the Council in respect of its
examination and, if thought fit, its approval of the memorandum and
articles of association of an incorporated
practice which is a company or any alteration thereof
and such fee shall be in addition to the fee referred to in rule
5.3 (a)(iv).
Undertaking to Council
5.5 Every person who becomes a member of
an incorporated
practice which is incorporated with limited
liability shall grant an undertaking to the Council on the same terms as the
undertaking described in rule 5.3(d).
Ongoing Provisions
5.6.1 The members and directors of
an incorporated
practice which is a company shall ensure that the
conditions of its memorandum and articles of association are given
effect to at all times and without delay.
5.6.2 The Council may at any time require
an incorporated
practice which is a company to demonstrate that the
requirements of rule 5.4 are being complied with.
5.6.3 Incorporated
practices shall notify the Council, within fourteen days of
such change, of:-
(a) any change
in the address of the registered office of the incorporated
practice; and
(b) any change
in the members or directors of an incorporated
practice.
5.6.4 Incorporated
practices shall send to the Secretary a copy of all
documents which require to be filed with the registrar of companies
or the Accountant in Bankruptcy contemporaneously with the despatch
of such documents to the registrar of companies or the Accountant
in Bankruptcy.
5.6.5 Incorporated
practices shall send to the Secretary a copy of all
certificates issued by the registrar of companies forthwith upon
receipt thereof by the incorporated
practice.
5.6.6 No person who is not a member of
an incorporated
practice (and duly qualified to be such a member
in terms of rule 5.2) shall enjoy any of the rights of membership
except (subject to rule 5.4.1(f)) an executor of a deceased member
of the incorporated
practice qua executor of that member.
5.6.7 Where a member of
an incorporated
practice dies or for any other reason ceases to
hold a current incorporated
practice or, as the case may be, has its
certificate of recognition revoked under rule 5.9
the incorporated
practice shall immediately take the necessary
steps, whether in terms of its memorandum or articles of
association or otherwise, to ensure compliance with this rule
5.
5.6.8 No person shall be appointed or
shall act as a director of an incorporated
practice which is a company unless he is a member
thereof.
5.6.9 Every incorporated
practice to which these rules apply shall require
to be insured against such classes of professional liability as are
indemnified by the Master Policy (as referred to in rule 7 in
Section B) and the Council shall prescribe from time
to time the limits of indemnity and self-insured amounts applicable
to incorporated
practices and may prescribe different limits for
different incorporated
practices or classes of incorporated
practices.
5.6.10 The Council shall maintain a list
containing the names and places of business of all incorporated
practices, which list shall be open for
inspection at the office of the Society during the office hours
by any person without payment of any fee.
Company Directors Disqualification Act 1986
5.7.1 In the event that a disqualification
order under the 1986 Act is made against a person who is a member
or a director of an incorporated
practice, whether in respect of his conduct in
relation to any incorporated
practice of which he is a member or director, or
otherwise, that person shall, forthwith upon such order being made,
notify the Council and shall supply a copy
of the order to the Council.
5.7.2 Subject to rule 5.7.3, the consent
of the Council shall be required:
(a) for any
such person as is referred to in rule 5.7.1 to become or remain a
member or director of an incorporated
practice; and
(b) for any
other person against whom a disqualification order under the 1986
Act has been made to become a member or director of an
incorporated
practice.
5.7.3 The consent of
the Council shall not be required
pursuant to rule 5.7.2 if, and to the extent that, the court has
given its consent to any such person as is specified in rule 5.7.2
becoming or remaining a director of an incorporated
practice which is a company or a member of
an incorporated
practice which is a limited liability
partnership.
5.7.4 Any person who requires the consent
of the Council pursuant to rule 5.7.2
shall provide all reasonable co-operation with any request from
the Council for information and
documentation regarding the circumstances of the relevant
disqualification order.
5.7.5 In giving or refusing its consent
pursuant to rule 5.7.2, the Council shall have regard to the
facts and circumstances surrounding the making of the relevant
disqualification order and to the terms thereof, to the interests
of the public in relation to the profession of the person concerned
and to the effect of any refusal of consent on the person concerned
and on any incorporated
practice of which he may be a member or director.
Any consent may be given subject to such conditions as
the Council considers it appropriate
to impose.
5.7.6 In the event, and to the extent,
that the Council shall refuse a consent
pursuant to rule 5.7.2(a) or shall give such a consent subject to
conditions which require the person to whom it is given to cease to
be a member and/or a director of an incorporated
practice which is a company and/or a member of
an incorporated
practice which is a limited liability
partnerships, the person affected shall
immediately cease to be such a member and/or director and/or member
of such incorporated
practice.
5.7.7 For the avoidance of doubt, any
person against whom a disqualification order under the 1986 Act is
made which prohibits that person from being a director of
an incorporated
practice which is a company or from being a member of
an incorporated
practice which is a limited liability
partnerships shall immediately cease to be such a
director or member and shall not seek to apply for the consent of
the Council in respect of that
particular disqualification pursuant to rule 5.7.2.
5.7.8 In rules 5.7.1, 5.7.2 and 5.7.5,
references to the term "member" in connection with
an incorporated
practice shall include reference both to
membership of an incorporated
practice which is a company and to membership of
an incorporated
practice which is a limited liability
partnerships.
Recognition
5.8.1 The Council shall consider every
application made to it in terms of rule 5, and, if
the Council is satisfied by the
applicant(s) that a body corporate has complied in all respects
with the requirements of rule 5, the Council shall issue to the
applicant(s) a certificate recognising the proposed body corporate
as an incorporated
practice which certificate shall state:-
(a) the name
and registered number of the incorporated
practice;
(b) whether
the incorporated
practice will carry on business with liability
which is unlimited or limited by guarantee or limited by share
capital or as a limited liability
partnerships; and
(c) the date
of the certificate of recognition.
5.8.2 The certificate of recognition or a
true copy of it shall at all times be displayed at every place of
business of the incorporated
practice.
5.8.3 An incorporated
practice which proposes to re-register as
unlimited under section 102 or as limited under section 105 of the
Companies Act 2006 shall, before applying for re-registration under
section 103 or section 106 of that Act, as appropriate, submit to
the Council an application to be
allowed to re-register accordingly. Such application shall be in
the form mutatis mutandis required by rule 5.3 for the recognition
of an incorporated
practice in the form proposed after
re-registration. If the Council is satisfied by the
applying incorporated
practice that it has complied in all respects
with the requirements of rule 5, the Council shall issue to the
applying incorporated
practice a certificate entitling it to apply for
or to resolve to be re-registered as aforesaid and containing the
information specified in rule 5.8.1. The incorporated
practice shall not apply for or resolve to be
re-registered as aforesaid until such certificate has been issued
and shall so apply or resolve within one month of the date of such
certificate. The certificate of authorisation for re-registration
or a true copy of it shall at all times be displayed at every place
of business of the incorporated
practice along with the certificate of
recognition.
Revocation of Certificate of Recognition
5.9 A certificate of recognition of
an incorporated
practice may be revoked by
the Council if:
(a) recognition of the incorporated
practice was granted by the Council by reason of error
or fraud;
(b) an incorporated
practice goes into liquidation (other than
members' voluntary liquidation approved by the Council for the purpose of
amalgamation or reconstruction) or if a provisional liquidator,
receiver or judicial factor is appointed to
such incorporated
practice or if an administrator within the
meaning of the Insolvency Act 1986 is appointed to
such incorporated
practice or if such incorporated practice enters
into a voluntary arrangement under Part I of the Insolvency Act
1986, or if such incorporated
practice is struck off the register of companies
or the register of limited liability
partnerships;
(c) control of
an incorporated
practice ceases for any reason,
however temporarily, to be exclusively by persons duly
qualified to exercise such control in terms of rule 5; or
(d) such
incorporated
practice has failed to comply with any of the
provisions of rule 5.
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