The global credit crunch and the so-called ‘double dip’ recession in the UK together with rising fuel prices are already creating difficult conditions for many road haulage companies.
The number of hauliers going into administration is steadily increasing, yet it is all too easy during such difficult times for a company to overlook its obligations under an Operator’s Licence, one of the most essential assets of any transport company. An Operator’s Licence is conditional upon the licence holder being able to demonstrate sufficient financial standing to maintain the vehicle safely on the road.
Financial standing should be demonstrated by reference to recent bank records showing funds available to the value of £8,100 for the first vehicle and £4,500 for every additional vehicle, if looking at a standard national or international licence. If there is subsequently any material change in the company’s financial status, it is imperative that the Traffic Commissioner be advised as soon as the directors know or ought to have known that the company can no longer meet its financial standing requirements. This point is often some considerable time before the company goes into administration and certainly before any order / appointment is made. Failure to notify the Traffic Commissioner’s office can lead to adverse conclusions being drawn against the directors or anybody involved in the previous business, if they were then to apply to be a part of a new operator’s licence in the future.
There is a specific procedure set out in legislation that operators must look towards in the event of financial difficulties. Regulation 31 of the Goods Vehicles (Licensing of Operators) Regulations 1995 deals with the continuance of licences in the event of the death, incapacity or insolvency of the licence holder. It provides that where the holder of an Operator’s Licence goes into liquidation or enters administration, the Traffic Commissioner may direct that the person carrying on the business is to be treated as the licence holder for a period of up to twelve months, which can be extended to a maximum of 18 months in ‘special circumstances’.
Once an administrator or liquidator has been appointed, if a decision is made not to continue with the road haulage business of a company, immediate steps must be taken to surrender the licence and return the discs for authorised vehicles on the Operator’s Licence.
However, if the road haulage business is to continue (usually as a result of a sale as a going concern) an application under Regulation 31 must be made at the earliest opportunity in order for this to continue. The consequences of failing to make this application can be seen in Brian Hill Waste Management Ltd v Secretary of State for Transport , where the licence held by the company in administration was revoked, followed shortly after by the company going into creditors’ voluntary liquidation. This case offers helpful guidance as to the correct approach to take when a haulage company enters administration.
Is an Operator’s Licence transferable?
It is important to note at this stage that Section 48 of the Goods Vehicles (Licensing of Operators) Act 1995 (the Act) provides that an Operator’s Licence is not transferable. A typical scenario in such circumstances is where the directors of the company in administration or liquidation set up a new company with the intention of purchasing the business of the old company. As Operator’s Licences are not transferable, the new company must apply for a licence in its own right, but may under Regulation 31 make an application to the Office of the Traffic Commissioner to continue the licence of the old company (with the administrator’s or liquidator’s consent) while this is determined. Once the new licence is granted the old licence will normally be revoked.
If the above steps are not taken, it is highly likely that both the old and new companies will be called to Public Inquiry on the grounds of a potential loss of good repute, the loss of financial standing and possibly unlawful operation in breach of Section 2 of the Act. This can result in regulatory action, licences being revoked and directors being disqualified from obtaining any further licences, which could clearly have potentially disastrous consequences for any future business operations.