The SRA has announced the launch of a consultation on proposals to require law firms to notify it of prescribed events, including an advance notification of a merger or acquisition which has reached the stage of agreeing Heads of Term or similar.
The SRA currently asks firms to notify it of a merger or acquisition within 28 days of the completion of the transaction. A firm which ceases to trade as a result must also notify the SRA of its closure no more than seven days in advance. As part of the SRA’s broader trend towards a more proactive supervision model to identify risks sooner, the SRA is proposing to request firms to notify it of contemplated mergers and acquisitions at the Heads of Term stage, or at least 30 days prior to the likely completion date. Where a transaction moves on a faster timescale, an alternative notification process is also being considered.
The SRA has stressed that this would be a notification rather than an approval process, and so we would not expect approval to be required pre-completion other than in certain circumstances. However, firms would now have to consider the potential impact of these proposals on completion planning timescales and greater regulatory scrutiny pre-completion than is currently the case, particularly in relation to the handling of client money and broader client protection issues. A failure to comply with the new reporting requirements is likely to lead to the imposition of a fixed financial penalty.
The consultation, which also proposes a new notification process for firms which begin to hold or receive client money, closes at 9am on Monday 17 August. The link can be found here.
If you’re navigating a potential merger or acquisition and want to stay ahead of the current and potential regulatory requirements, please get in touch for an initial consultation on how we could help.