Barristers as managers of recognized bodies

The opportunity for barristers to become managers of recognized bodies means that barristers may be exposed, for the first time, to business practices that are unfamiliar to them. In particular, the SRA rules make all managers of recognized bodies responsible for (and entitled to deal with) client monies. Similarly those with managerial responsibility for handling clients’ money should ensure that they are familiar with the relevant Rules. Entitlement to handle client monies is, however, a matter for the SRA as regulator of the entity and subject to that for the regulated entity, and not for the BSB as the professional regulator of the individual barrister. This is something that barristers have not previously been entitled to do. In order to qualify, a solicitor has to pass examination papers in accounting for client monies. Any barrister managers of LDPs are strongly urged not personally to deal with client monies until they have received adequate training and have acquired a sufficient understanding of the Solicitors’ Accounts Rules.

The amendments to the Code give barristers who are managers of recognized bodies the right to conduct litigation (employed barristers already have this right), subject to complying with the Employed Barristers (Conduct of Litigation) Rules (Annex I of the Code) and the Approved Regulator’s rules. Rule 1(b) of the former requires a period of practice under the supervision of a qualified person who has been entitled to conduct litigation for the previous 2 years unless the BSB grants an exemption on the grounds of relevant experience.

Both the SRA Code (para 1.05) and the Bar’s Code (paras 606.1, 701(b)) contain rules that require a barrister not to act beyond his professional competence. Any barrister acting as manager of a recognized body should ensure that he/she does not infringe this rule.

The new rules 407, 505 and 507 replace rule 307(f) on client money. For self-employed barristers and all employed barristers, the existing prohibition on receiving and handling client money is maintained, but the prohibition does not apply to managers of recognized bodies. They will therefore be able to be responsible for client money, subject to the rules of the Approved Regulator for the entity of which they are a manager. Such rules may include requirements as to training and they will, in any case, be subject to the Code requirements not to undertake any task which they are not competent to handle.

European Union Direct Taxes

Permanent Establishment is a vital concept in international taxation. While for direct taxes, it is mainly defined by the OECD Model Convention, the European VAT Directive and its implementing Regulation provide an EU-wide approach for VAT.
Difficulties arise as terminology and definitions in indirect and direct tax diverge. Moreover, countries have implemented and interpreted the EU and OECD rules in a different way, impacting on issues like cross-border reorganisations, transfer pricing, taxation of dividends and interest and royalties, tax residence, temporary and permanent transfer of assets, place of supply and VAT liability.
In both direct and indirect tax, the concept of Permanent Establishment has undergone very recent changes: The 2010 changes to the OECD Model Convention and Commentary, and in particular the new Art. 7, will be adopted in national law, as speakers from the Netherlands and Germany will report. The effect of the new definition on treaties with other countries will also be considered.
Some of this topic is addressed in the new book "European Union Direct Taxes", by the International Tax Professor Salvador Trinxet Llorca.
In indirect tax, the current more important issue is the practical consequences of the adoption of the Regulation implementing the EU VAT Directive in January 2011.

Code of Conduct Amendments to UK LDPs and entities

With effect from 26 March 2010, the prohibition in the UK Bar’s Code of Conduct on barristers (other than employed barristers) supplying legal services to the public through or on behalf of any other person ceases to have effect. Instead, barristers are permitted from that date to supply legal services to the public in three different ways: as a self-employed barrister (as previously), as a manager or employee of a recognized body, subject to the rules of the approved regulator of that body, or as an employed barrister (to the same extent as previously permitted under rule 502).

Recognized bodies include what are generally known as Legal Disciplinary Practices (LDPs). These are a creature of the Legal Services Act 2007 (the Act). At present, only the SRA can regulate LDPs that are authorized to conduct litigation and exercise rights of audience, though the Council for Licensed Conveyancers (CLC) also has power to regulate LDPs. They can have different kinds of qualified lawyer and non-lawyers as managers and employees (or just lawyers). At present, no more than 25% of the managers (or shareholding) in an SRA-regulated LDP can be non-lawyers, and only non-lawyers who are managers can own a shareholding. At present, recognized bodies can only supply legal services (restricted or not) to the public, not other services such as accountancy or valuation services.

The significant change is accordingly to permit barristers to practice as managers of “recognized bodies”. So, e.g., a law firm regulated by the Solicitors Regulation Authority (SRA) is a recognized body. These are entities of all kinds, or sole principals, authorized to provide reserved legal activities by an approved regulator other than the Bar Standards Board (BSB). A “manager” for these purposes is a partner of a firm, a director of a limited company or a member of a limited liability partnership which is a recognized body, as the case may be.