As some hospitality businesses sadly fold, we take a look at the impact of insolvency on licensing law
Lockdown has been agonising for the hospitality trade. None more so than pubs and restaurants – those social staples that went from bustling businesses to desolate venues within days. Now that restrictions have been eased, many are getting back on their feet. But for some it could be too late.
While many businesses kept afloat with government support or adopting takeaway models, there are many businesses which will sadly fold.
Impact of insolvency
This means that premises licence holders – and those with vested interest such as landlords – should consider the impact of insolvency on them and wider stakeholders.
Any insolvency event of the licence holder of the premises may cause the premises licence to automatically lapse. In the case of a company, this includes:
The appointment of administrators or an administrative receiver
Going into liquidation or
The approval of a voluntary arrangement by its directors
When they are made bankrupt
Upon the approval of a voluntary arrangement proposed by them or
Upon entering a trust deed for their creditors
The freeholder or leaseholder
A legal mortgagee in respect of the premises
A person in occupation of the premises or
Any other person prescribed by the secretary of state to be notified of licensing matters
If you’re a Premises Licence Holder or have a vested interest in a licensed premises, contact your Local Authority to check the licence hasn’t lapsed.
If it’s still valid, apply to the Local Authority to register your interest
If the licence has lapsed, did it lapse within the previous 28 days? If so an application can be made to transfer the licence to a new entity to keep it alive.
If more than 28 days has passed following the lapse of a licence, the licence is terminated and you’ll need to be submit a new application to the Local Authority
If you’re concerned that a registration of interest does not provide enough protection then an application for a shadow premises licence can be submitted. This will follow the same process as a new premises licence application.
Licencing Act – what is means for individuals
Under the Licensing Act 2003 (the ‘Act’) a premises licence immediately lapses following an insolvency event. Thus at the point of the lapse all licensable activities, including the sale of alcohol, must cease.
The Act does allow for the licence to be reinstated – there’s a small 28 day window following the date of the ‘triggering event’ for the licence to be transferred to a solvent body. After the 28 day period, if a transfer has not taken place the premises licence will be gone for good.
However, there are mechanisms in place that protect against this: parties with a vested interest in the property can make a ‘registration of interest’ with the appropriate licensing authority and/or a shadow premises licences granted under the Act.
What are Registrations of Interest?
This is a right of certain parties – including:
A person (which will include a business or company) with a property interest in any premises situated in the Licensing Authority’s area may give notice of their interest to the authority using a prescribed form and on payment of the relevant fee.
It’s entirely at the discretion of such persons whether they choose to register or not – and isn’t a legal requirement.
The notice will have effect for 12 months, but a new notice can be submitted on an annual basis. While the notice has effect, if any change relating to the premises has been made to the licensing register (which the licensing authority has a duty to keep under section 8 of the 2003 Act), the licensing authority must notify the person who registered an interest of the matter to which the change relates.
This does rely on local authority staff issuing the notification, which in this time of skeleton staff isn’t guaranteed and could lead to it not being issued. Furthermore, a ‘register of interest’ doesn’t give notice of insolvency.
Where a company holds a premises licence we also advise that a registration of interest is not only submitted to the local authority, but that an interest is also registered at Companies House against a company. Notification of events including any insolvency arrangements or actions to ‘strike off’ will then be provided to the party registering the interest.
Shadow Premises Licences
A premises licence has several benefits beyond allowing the venue to be used for licensable activities, including increasing the value of the premises itself. During the current period of closure we would therefore advise that landlords review premises where their tenant holds a Premises Licence.
Remember that if the tenant becomes insolvent, this will lead to the immediate lapse of the Premises Licence. Landlords should always be alert to this. Also, there’s a chance that an aggrieved tenant surrenders the premises licence without giving notice to the landlord.
In each scenario above, there are provisions for reinstatement within 28 days. In order to give complete protection to a premises with a premises licence, a Shadow Licence is the most complete way of doing so.
As the name suggests it’s a licence which shadows an existing licence – i.e. on exactly the same terms as the original.
Who would make the application for a Shadow Licence?
It would normally be applied for and granted to a landlord, the purpose of which is to provide the landlord with the protection of having a licence in its own name. If the original premises licence then lapses or is surrendered, the landlord is able to use the Shadow Licence to replace it. Thus he or she can market the premises as having a licence with identical benefits as the original.
This is a crucial time-saver – avoiding the need for the landlord to apply for new premises licence.
Checklist
We’ve compiled this essential checklist for stakeholders who find themselves in the circumstances above.
We’re here for you – just ask
We’re experts in premises licensing and can save you time and hassle. Get in touch if you need help registering your interest for a premises licence, or applying for a shadow premises licence.
You can contact Jonathan Hyldon on 01472 253 902 or email jonathan.hyldon@wilkinchapman.co.uk
Insolvency support
Whether you’re an individual or acting on behalf of a company, insolvency specialists at Wilkin Chapman Business Solutions will support you all the way. Call the team on 01302 320 600.
